Standard Chartered Investor Personality Study reveals differences between Hong Kong and Singapore investors amid COVID-19 market disruption
Standard Chartered has announced the publication of its new Investor Personality Study 2020, which reveals the individual personality traits that have a major impact on the way investors react when faced with difficult investment decisions.
The study, which was carried out in partnership with behavioural finance experts, Oxford Risk, surveyed 1,200 emerging affluent, affluent and high net worth investors across Singapore, Hong Kong and Taiwan and revealed nine personality traits that best describe each investor’s financial personality: Risk tolerance; Speculation; Composure; Confidence; Financial Comfort; Desire for Guidance; Impulsivity; Desire for Legacy; and Internal Locus of Control.
From these traits, the research produced three main investor archetypes -
The first, named the ‘Comfortable’ investor, ranks high on Composure, Confidence, Internal Locus of Control and Financial Comfort, but low on Impulsivity and Speculation. They are likely to stay relatively calm and make relatively more reasonable decisions in turbulent times.
The second archetype, entitled the ‘Conservative’ investor, ranks high on Financial Comfort and Internal Locus of Control. They rank low on Speculation and Impulsivity. However, unlike Comfortable investors, they rank lower on Confidence and Composure and have the lowest Desire for Guidance of all the groups, according to the Standard Chartered press release. They are less likely to invest in volatile portfolios and prefer clear investing and decision-making principles.
Finally, the third archetype, christened the ‘Enthusiastic’ investor, ranks high on Speculation, Impulsivity and Desire for Guidance with moderate Composure. They have the lowest Internal Locus of Control (they are less likely to believe they control their own destiny and luck). They prefer to set aside a portion of their wealth to satisfy their impulse for speculative investments without jeopardising their entire wealth.
By understanding investor behaviour in its entirety, wealth advisors can personalise investment experiences and, with a deeper understanding of the traits that make up their personalities, investors themselves can watch out for their weaknesses and play to their strengths for the long term. This can be accomplished through customised sharing of market information, tailored assistance with decision-making and more personalised investment solutions, using recent progress in technology to make the approach achievable at scale.
Investor Behaviour in Markets
The report highlights cultural and geographical differences in the prevalence of each investor archetype across the three markets: Singapore-based investors tend to be Comfortable investors (47 per cent of the market total) who have more investing experience, a high desire to leave a positive legacy and are more likely to be male; Hong Kong has the highest concentration of Enthusiastic investors (40 per cent of the market total, versus 30 per cent in Singapore) who are relatively impulsive, speculative and believe in luck; while Taiwan has the largest group of Conservative investors (44 per cent of the market total, versus 27 per cent in Singapore) who are more likely to be affluent investors rather than high net worth investors with relatively lower risk tolerance.
In particular, Singapore-based investors are found to value confidence, financial comfort and risk tolerance more than investors in the other two markets and are least likely to be impulsive with their investments.
High-scorers for the “confidence” and “financial comfort” traits tend to be wealthier individuals who have higher Composure scores compared to affluent investors and have a higher ability to withstand volatility over their investment journey. This may be because affluent investors have relatively fewer assets to rely on when markets get choppy.
Overall, investors in Asia stand out in their appetite for speculative investments, where some enjoy investment risk for its own sake rather than future returns. This is in stark contrast to Europe, where investors exhibit consistently low speculation.
Sumeet Bhambri, Head of Wealth Management, ASEAN and South Asia, Standard Chartered Private Bank, said:
“Our clients in Singapore have been measured in their investment approach especially during these volatile times. While some have expressed concern about their investments, we have also seen a steady increase in investment activity with the valuations of several risk assets turning more attractive. Active awareness of investment personalities helps our wealth advisors to better understand our clients’ inclinations and risk appetite and provide a balanced view of risks and opportunities to help them ride out short-term fluctuations.”
Alexis Calla, Chief Investment Officer, Standard Chartered Private Bank, said:
“Our investment approach, based on beating cognitive biases, helps clients recognise what can compromise their ability to make objective decisions, especially during periods of extreme market volatility such as the current COVID-19 scenario. We are combining behavioural insights with emerging technologies to build innovative tools to deliver a more personalised investment experience to our clients, from the choice of investment products, to how and when they receive information on their portfolio performance.”
Please CLICK HERE to view the full report.