KiwiSaver choices made on the home front - researcher

Dr Annie Zhang's thesis 'Essays on Household Behaviour and Individual Investor Behaviour' studied a range of factors that influenced investor behaviour.

Those that you live with have the strongest influence on your investment decisions, a Massey researcher has found.

Through her research analysing factors that influenced individual investor behaviour, Massey University PhD graduate Dr Annie Zhang was given access to databases containing over 600,000 investor accounts from four large KiwiSaver providers and one bank.

"I found that almost two-thirds of people hold the exact same investment fund - and therefore identical asset allocation - as the people they live with," she said.

"People in the same household are at least two-and-a-half times more likely to hold the same investment fund."

Zhang said the family and household were so fundamental it was easy to overlook.

"I'm sure there are many cases of what you could consider the ultimate peer effect - where one member of the household makes investment decisions for others."

A family's influence on financial matters had both pros and cons, she said.

"On the one hand, it is good to know that the family and basic human relationships matter and play a significant role in the increasingly complex financial system.

On the other hand, however, our reliance on family is problematic because of a real need for considered and educated responses to inform our decision making.

Annie Zhang

"On the other hand, however, our reliance on family is problematic because of a real need for considered and educated responses to inform our decision making."

Switching investment funds was also influenced by family, with investors much more likely to switch funds if someone in their household has switched, Dr Zhang said.

"On average, investors only switch funds one per cent of the time.

"But if a household member switches, then that likelihood increases to 10 per cent for a six-month horizon," she said.

Workplaces also had an effect on investment behaviour, with co-workers at least 1.4 times more likely to hold the same investment fund as others in their workplace, Zhang's research found.

Zhang said she chose the topic of her thesis 'Essays on Household Behaviour and Individual Investor Behaviour' as it was an area where she felt she could "make a real contribution to the well-being of everyday New Zealanders".

She said she hoped her hoped her research sparked an interest in empowering households to improve their financial decision making.

"The evidence seems to suggest that what we need is a mix of formal and informal channels.

"We definitely need what financial institutions are already providing, but there is also scope for new modes of delivering financial literacy."

Dr Zhang also found that female, older and wealthier investors were more likely to seek out financial advice, and female, younger and wealthier investors are more likely to choose funds that have achieved higher past returns.

However, investors who received financial advice were more likely to invest in riskier assets, and over the five-year timeframe of the study, seeking financial advice produced only a marginal difference on investment returns, her research found.