Dynamic Planner has revealed a first look at findings from its long-term project into investor behaviour conducted in partnership with Henley Business School, the key aim of which is to help investors achieve better outcomes in the face of financial adversity.

The findings lay bare how emotional well-being in difficult investment periods differs between respondents who had worked with a financial planner and those who had not. Survey participants were shown hypothetical scenarios where they experienced a market crash and a decline in their pension values.

Louis Williams, Dynamic Planner’s head of psychology & behavioural Insights said: “The findings so far show that, generally, those who had worked alongside a financial planner were more resilient, had higher levels of positive emotions and self-esteem, were more confident in their abilities to manage their finances, more conscientious and emotionally stable, and were better able to regulate their emotions.

“It might be the case that such individuals with these positive emotional attributes may be more likely to seek financial advice rather than developing these qualities because of engaging with a financial planner.

But the evidence does demonstrate that there are important individual differences. In fact, when controlling for factors that may lead to seeking financial advice and having higher levels of these resilient characteristics, such as age and wealth, we continue to observe the emotional well-being benefits of having experience with a financial planner. Such qualities of stability and resilience are what we desire to promote and develop within all investors to face periods of adversity with confidence.”

Of those questioned, 58% of respondents who had experience of financial advice were concerned, while 25% were still optimistic about their financial situation. Of those without experience of financial advice, 74% were concerned and only 12% were optimistic. This level of concern remained robust amidst the impact of Covid-19.

When it comes to financial risk, individuals who had worked with a financial planner were more comfortable with it – 13% were in a medium-high risk level (7-10) and 21% in a low-medium risk level (1-4), whereas only 7% of those with no experience were in a medium-high risk level and 43% in a low-medium risk level.

The differences in risk tolerance levels were apparent despite the impact of Covid-19 on market volatility. However, the study also found that respondents who took part in the survey after the real-life market crash as a result of Covid-19, had lower levels of confidence in their abilities to manage their finances and higher levels of negative emotions.*

Dynamic Planner launched its government-sponsored behavioural science and investment study with Henley Business School in September 2019.

Its key aim is to understand how investors behave when their investments fall in value; their natural actions, the time it takes them to act and how communications and investor education through their adviser can be improved to prevent detrimental actions, and ultimately lead to better investment outcomes.

Further Reading

How much investment risk should I take?

How often should you rebalance your retirement portfolio?

Adam Higgs: What should you look for in a risk-profiling tool?