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Decoding investor behavior: Bridging the disconnect between hope and reality

From the Global Financial Crisis to changing technology, a diverse world of perspectives shapes the investor mindset. Their hopes and fears. Their financial dreams and realities. The trends and concerns that influence their behavior.

For the past five years, Legg Mason's groundbreaking survey has provided you with invaluable insight into investors' motivations, biases and the complex, ever-evolving landscape they must navigate.

Is the shadow of the global financial crisis still dimming investor optimism? What's missing for those turning to technology for investment decisions? Are retirement savings leaving investors short of "comfortable"?

Explore the outlook of 15,300 investors in 17 countries across Asia Pacific, Europe, Latin America and the U.S. as we focus on three key themes:

  • Perceptions vs Reality
  • Humans vs Machines
  • Youth vs Experience

Perception vs Reality:Is fear driving investor behavior?

Nothing ventured. Nothing gained. But finding a healthy risk balance is tricky and personal for each investor. Our survey found that U.S. Investors are still substantially influenced by the shadow of the 2007-8 Financial Crisis and revealed concerning trends in how investors perceive and use risk. Even those who describe themselves as aggressive investors don’t have an asset allocation reflecting that. And their cautious investments may hinder their long-term potential for higher returns.

It is critical for investors to understand the risk profile of their investments. Here we examine the gap between perception and reality.



What is the extent of influence of the Global Financial Crisis and subsequent recession on your saving and investment decisions? (%)

  • Still strongly influenced
  • Still somewhat influenced
  • Not at all influenced
  • Don't know

Top 10 biases

Beliefs and ideas tend to be shaped by one’s personal upbringing and experiences, more so than by an informed, general and global view. The same applies to investment matters, leading most investors to make decisions based on what they know or what surrounds them, ignoring a whole universe of information that is available to them. This limits their opportunities, making their financial goals harder to achieve. Which are the most common investment biases? The Legg Mason Global Investment Survey has uncovered the top 10.

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Financial Crisis: Gone But Not Forgotten

The Global Financial Crisis and the ensuing Great Recession may have forever changed investor thinking. If Millennials invest more like their Depression-era grandparents than their Boomer parents, how will these changes affect the future of global financial markets?

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Risk Is On, Investors Say

After a decade of gloom in which investors mainly wanted to protect capital and invested in low, even negatively-yielding bonds, the light is beginning to dawn: 37% are planning to take on more risk in their portfolios this year.

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How optimistic are you about your investments over the coming 12 months? (%)

Factoid

Humans vs Machines:Is technology really the silver bullet?

Technology is changing every aspect of our lives, including how we manage our finances and make investment decisions. If human judgement takes a back seat to the increased use of online data resources, money-managing apps and products that invest our money on the basis of algorithms, the world of personal finance and investment may be fundamentally changed.

To what degree are investors ready to trust their finances to machines, and how important is the human factor in creating favorable user experiences and investment outcomes?



Do you agree with the following statements?

The Bionic Plan

Technological change always alters traditional ways of doing things, most often for the better. Technology is currently bringing that opportunity to the financial advice industry in rapid fashion. By effectively combining the capabilities of technology with relational skills, industry knowledge and experience, financial professionals can empower their clients. And working together, they can build better relationships and stronger financial plans.

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Financial Advice? Make Mine Human.

Technology for research? Yes. Technology for execution? Sure. But the machine stops there. Our survey shows a strong majority of investors – including tech-native Millennials – still favor human interaction when seeking financial guidance toward their investment decisions.

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Tech Game: Emerging Markets Lead

Emerging market investors - led by Asian millennials - are well ahead of the curve in terms of technology use when making or executing investment decisions. Our survey reveals high-tech empowerment is crucial in a fast-changing world, but there's an enduring need for professional advice.

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Do you use websites or apps for these areas of personal finance? (%)

Factoid

Youth vs Experience:Will millennials be better prepared for retirement?

Are retirement goals falling short across generations? Baby Boomers seemed to have had it made enjoying equity and bond bull runs and benefitting from defined benefit pension schemes. For Gen Xers and Millennials who are seeking to pay off student loans and own a home, retirement saving may be even tougher.

We discovered that Boomers have many goals still unmet for comfortable retirement. Explore the reasons and remedies for this dilemma and how Gen Xers and Millennials can avoid falling into the same traps.


Thinking specifically about your retirement goals – which have you achieved and which have you yet to achieve?

Not yet achieved Not yet achieved
Already achieved Already achieved
Airplane 0

Travel extensively

Piggy bank 0

Enjoy a good retirement income

Bill 0

Maintain pre-retirement standard of living

Globe 0

Live abroad

Palm tree 0

Have a holiday home

Coins 0

Be debt-free

Cardiogram 0

Have access to good healthcare

Businessman 0

Keep working / I don’t want to retire

Tree 0

Volunteer for good causes and charities

Airplane 0

Travel extensively

The High Price of Prudence

As befits their age, Millennial investors as a group are ambitious, optimistic and outward-looking. Yet over 70% call themselves "conservative" investors, and they have the same inclination to save rather than invest, and to keep cash levels high. The cause could be the lingering influence of the Global Financial Crisis and Great Recession. But these conservative practices could prevent them from using their most important investment tool: time, which they have in relative abundance.

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How Real Is The Global Retirement Crisis?

Experts worldwide are concerned that investors are under-saving for retirement, and may not be taking the risks necessary to close the gap. Are things really that dire? Our survey indicates that savings in DC plans are well behind what investors are likely to need later in life.

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Boomers Not Rockin' Retirement Goals

Boomers may have reaped advantages in their youth, but a high percentage have yet to achieve basic retirement goals like being debt-free. Younger generations can learn from their experience; will have to invest differently; and act now, while time is on their side.

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Retirement goal: Make sure that I am debt-free (%)

Factoid

U.S. findings

Young investors: haunted by the past

Nearly 2/3rds of U.S. investors say their decisions are still influenced by the Global Financial Crisis of 2007–8. But the impact is most severe among Millennials; almost 6 in 10 say it 'strongly' impacts their investment decisions.



Given the long shadow of the Global Financial Crisis, it is not surprising that Millennial investors are more conservative about risk than U.S. investors in general, with 85% describing themselves as either "somewhat or very conservative.”

Retirement, American Style

Our survey suggests half of Americans can’t wait to retire. But dogged by chronic under-saving and health care costs, many could be facing a long road ahead.

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Young, ambitious and scared: Can Millennials shed their crisis mentality?

Conventional wisdom holds that younger Americans should take advantage of the longer time horizon before retirement to increase their investments in higher-risk asset classes like stocks. However, U.S. Millennials don’t seem to have gotten the memo. Our recent survey showed that on average they hold less in stocks than their elders – influenced heavily by the legacy of the Global Financial Crisis.

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Data tables

2017 summary of global results

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2017 summary of U.S. results

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BACKGROUND & METHODOLOGY

The Legg Mason Global Investment Survey has been taking the pulse of investors worldwide for the past five years. Our goal is to better understand investors' hopes and fears, their financial dreams and realities, as well as what is influencing their behavior - from the Global Financial Crisis to changing technology.

Market Sample size
United States Total: n=900
High net worth: n=275
Europe (UK, France, Spain, Italy, Germany, Switzerland, Belgium, Sweden) Total: n=7,200
High net worth: n=1,371
Asia (Hong Kong, Singapore, Japan, Taiwan, China) Total: n=4,500
High net worth: n=1,230
Latin America (Brazil, Mexico) Total: n=1,800
High net worth: n=260
Australia Total: n=900
High net worth: n=306

This year we found investors who are:

  • more optimistic about investment opportunities but still impacted by the long shadow of the Global Financial Crisis;
  • increasingly turning to technology to help them organize their finances and make investment decisions, but who still want to know there is a human behind the machine; and
  • not entirely sure what they need to retire comfortably, but feel that they have not quite met their goals.

This year's survey reached 15,300 investors in 17 countries across Europe, Asia Pacific, Latin America and the U.S. - ensuring samples that are representative of the population of each country. Respondents are aged 18-74, have some income, are employed (unless retired) and are the sole or joint decision-maker for household investment decisions. Fieldwork was conducted through an online panel between January 12th and February 10th 2017. The high net worth criteria in the U.S. was set at $225,000+ in investable assets and individual country equivalents were set. Of the total sample, 3442 qualified as high net worth. There was also a fairly even split between the generations: 5,116 Millennials (18-35), 4,898 Gen X (36-52), 4,925 Baby Boomers (53-7).

Cicero Research:

The research was conducted by Cicero Research, a leading consultancy firm servicing clients in the financial and professional services sector. Cicero specialises in providing integrated public policy and communications consulting, global thought leadership programs and independent market research. Cicero was established in 2001, and now operates from offices in London and Brussels. http://cicero-group.com/

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