1. Hidden wealth – how consumers perceive wealth and its management? Anne Sunikka Helsinki School of Economics Presentation at IAREP 2008 at LUISS Rome Tomi Dahlberg, Anne Sunikka and Anssi Öörni Helsinki School of Economics, Department of Business Technology 4 of September, 2008

2. Anne Sunikka IAREP 4 Sept. 2008 2 Research-in progress project A new concept for total wealth management? –Consumers would get a new service for wealth management, diversification and allocation –Financial companies would get a systematic new tool that would facilitate customer encounters Main research partners –National Consumer Research Centre –Helsinki School of Economics Financiers –Finnish funding agency for technology and innovation –A Finnish financial conglomerate –A Finnish financial newspaper Others –Federation of Finnish Financial Services –Insurance Supervisory Authority –Tampere University –New York University

3. Anne Sunikka IAREP 4 Sept. 2008 3 Overview of the presentation Research questions Multiple methods Some theories… Preliminary results Conclusion

4. Anne Sunikka IAREP 4 Sept. 2008 4 Interview / Focus Group Themes and Research Questions Interview / Focus Group Themes –consumers’ perception of wealth –reasons for accumulating wealth and –perceived risks related to wealth management Research Questions –How do consumers perceive wealth in general and different asset classes, in particular? –How well do empirically discovered motives relate to those proposed by financial and social psychological theories?

5. Anne Sunikka IAREP 4 Sept. 2008 5 Background information

6. Anne Sunikka IAREP 4 Sept. 2008 6 Background information

7. Anne Sunikka IAREP 4 Sept. 2008 7 Theories (1) Financial theory –Efficient market hypothesis (Roberts, 1967; Fama, 1965 & 1970) –Capital asset pricing model (CAPM) that builds on the idea of an efficient frontier (Markowitz, 1952; Sharpe, 1965) –Assumptions about rational, value maximizing consumers (homo economicus) and the availability of perfect market information. Behavioral finance –Bounded rationality (Simon, 1955) –Judgment diverges from rationality: overconfidence, optimism, anchoring, extrapolation, and heuristics (see e.g. Kahneman et al., 1982). –Choice diverges from rationality: prospect theory (Kahneman and Tversky, 1979).

8. Anne Sunikka IAREP 4 Sept. 2008 8 Theories (2) Consumer behavior and social psychological theories Mowen (1988): three perspectives for consumer purchase decision-making: 1.Decision-making perspective – buying behavior results form consumers’ engaging in a problem-solving tasks (Simon, 1957; Howard and Sheth, 1969; Engel et al., 1968) 2.Experiential perspective – consumers make purchases to create feelings, experiences and emotions (Pillar and Mueller, 2004; Thompson, 1989) 3.Behavioral influence perspective – consumers act in response to environmental pressures (Foxall, 1991 & 1993). TRA (Fishbein and Ajzen, 1975) and TPB (Ajzen, 1991) propose the most important determinant of a person's behavior is behavioral intent. The individual's intention to perform a behavior is a combination of attitude toward performing the behavior and subjective norm (and perceived behavioral control in the case of TPB).

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13. Anne Sunikka IAREP 4 Sept. 2008 13 Conclusions Consumers do not perceive wealth as a unified concept or portfolio. Rather, various wealth categories are perceived differently. The motives to manage wealth given by consumers deviate from those proposed by financial theories. The link between risk and return is poorly represented among consumers’ wealth management motives.