In 2018 Italian household financial wealth declined, whilst the saving rate has headed to 10%. ... more
In 2018, household financial wealth decreased in the Eurozone and more markedly in Italy, where the decline was compensated by a slight reduction in financial liabilities and an increase in real assets. The ratio between household net wealth and gross disposable income remains higher in Italy, where the gross saving rate has headed towards 10%).
Ageing population and digitalisation will significantly impact the economic landscape ... more
Ageing population and digital transformation pose significant challenges to European economies and more so in Italy. In our country the percentage of the population aged 65 and older is projected to increase up to 25% in 2025, at a pace steadily higher than the average European growth rate. Apart from Germany, Italy is already the country with the oldest population, with a median age of about 46 years and the highest old-age dependency ratio.
As for digitalisation, Italy is still lagging behind in terms of connectivity tools, human digital skills and the use of the Internet.
According to the 2019 CONSOB Observatory, men remain the lead financial decision makers, although in the vast majority of the cases they share their choices with either the partner or other relatives. Among the observed personal traits, risk aversion and loss aversion are very widespread, while 40% of individuals perceive to be highly financially self-effective. ... more
The 2019 Observatory on ‘The approach to finance and investment of Italian households' collects data on financial knowledge, behavioural attitudes, financial choices and investment habits of 3,058 respondents, of whom 1,311 individuals interviewed also in 2018. The sample is representative of the population of Italian financial decision-makers, defined as the primary family income earner, aged between 18 and 74. Men remain the lead financial decision-makers (74%), although in the vast majority of the cases they share their choices either with the partner or with relatives (reported to work in the financial sector in 14% of the cases). More than half of the sample accesses online banking, whilst the use of the digital channel for investment purposes is still far from becoming mainstream, as shown by the low proportion of individuals reporting to have joined a crowdfunding campaign or a robo advice platform (3% and 2% respectively). 76% of interviewees are ‘cautious in finance', as they are more oriented towards investments with a low/moderate risk-return profile, whilst 63% declare to be totally loss averse. In addition, the Survey gathers evidence about some psychological traits that may affect financial behaviour, such as procrastination, financial self-efficacy, financial anxiety, optimism, trust, attitude towards mental accounting and towards gambler fallacy. Barely 10% of respondents report to be prone to procrastination; almost half reports a high level of financial self-efficacy; about a half declare a low level of financial anxiety; almost one-third of the sample is optimistic; more than 60% of respondents do not trust financial intermediaries; almost all are prone to mental accounting; about one-fourth displays a tendency towards gambler fallacy.
The financial knowledge of Italian households remains low. In addition, numeracy as well as… ... more
The financial knowledge of Italian households remains low: in 2019, the proportion of correct answers to financial literacy questions ranges from 41% to 57% for basic concepts such as inflation, risk-return trade-off and portfolio diversification, substantially in line with the evidence gathered in previous Surveys, and falls to 20% or lower for advanced notions. Overall, 34% of the sample exhibits some misalignment between ex-ante perceived financial knowledge (i.e., before answering to the quiz questions) and actual knowledge, which in 14% of the cases translates into an ‘upward mismatch' (i.e. an over-estimation of one's own literacy) and in the remaining 20% into a ‘downward mismatch' (i.e. an under-estimation of one's own knowledge). In addition, based on ex-post self-assessment of financial knowledge (i.e. after answering to the quiz questions), 28% of respondents turn out to be prone to over-evaluate their financial literacy. Overconfidence seems to be more frequent among individuals making financial decisions alone, whilst underconfidence is more likely among those sharing choices with the partner.
Both the 2018 and 2019 Observatory explored people's numeracy, a precondition and a complement of financial literacy. The widespread failure to answer to simple questions on percentages and probabilities (i.e., gambler fallacy) clearly shows the need to improve individuals' numerical skills.
… knowledge of the most common financial assets show significant gaps. ... more
The vast majority of the interviewees are not aware of the main features of the most common financial assets (such as current accounts, stocks, bonds, mutual funds). 30% of the interviewees do not know any of the financial assets recalled in the quiz questions, while the sample average proportion of right answers is equal to 25%. Apart from current account, self-assessed knowledge of financial assets seems to be broadly accurate for the vast majority of the individuals, as the upward mismatch between perceived and actual knowledge shows up in less than 20% of the cases. As for risk literacy, most respondents consider stocks as a high-risk asset (exposed to high risk of capital losses, volatility of returns and liquidity risk) and, not surprisingly, as the investment that more than others can spark anxiety. Only 25% of individuals are able to correctly rank current accounts, bonds and stocks by their overall risk level and only 4% correctly performs rankings over four risk dimensions (capital losses, volatility, liquidity and inflation risk). When asked to pick the asset that could in principle best fit a specified investment goal within a specified frame, about 40% of respondents are not able to make any choice whilst the remaining are predominantly oriented towards real estate.
The role of parental education in strengthening individuals' background in financial matters seems to be confirmed by the positive correlation with financial knowledge and financial control. ... more
Previous waves of the CONSOB Observatory have highlighted the contribution of parental education to individuals' background in financial matters (considered by respondents as important as personal interest, household budgeting experience and professional experience). In addition, empirical research underlines the role of parental education in shaping individuals' financial behaviour over their lifetime. According to the 2019 wave, about 20% of respondents report to have been strongly encouraged by their parents to save and budgeting when they were teenagers. The role of parental education seems to be confirmed by the positive correlation with financial knowledge and financial control.
The vast majority of Italian households are not familiar with financial planning and budgeting, while saving is mainly driven by precautionary reasons. ... more
When managing personal finances, 60% of respondents either do not follow any firm rule or are not able to identify a recurring habit. Only 18% states to be fully aware of the meaning of financial planning although, after having been given the definition of a financial plan, 30% of individuals acknowledges to have it and to monitor their financial programmes (predominantly without taking note of expenses). Low savings is the main deterrent from financial planning along with the belief that tracking income and expenses is enough. As for the management of income and expenses, less than half of the households report to have a budget, which is always respected in 26% of the cases and carefully overseen by 30% of the sample. More than 60% of respondents state to save (either regularly or occasionally), mainly for precautionary reasons, whilst 43% of households hold mortgage debt and consumer credit.
The participation rate in financial markets is equal to 30%, with mutual funds and Government bonds remaining the most significant holdings in household portfolios after bank and postal savings. Informal advice keeps being the most common investment habit among investors ... more
The participation rate in financial markets is equal to 30%, with mutual funds and Government bonds remaining the most significant holdings in household portfolios after bank and postal savings. Interestingly, the proportion of investors answering correctly to the quiz questions on the financial assets they hold, ranges from 15% (relation between interest rate and bond price) to 83% (features of stocks), while the proportion of stocks and bank bonds holders faring well on the risk literacy questions ranges between 50% and 69%. Lack of savings is the main deterrent to financial market participation, followed by lack of trust and low financial knowledge.
Half of investors use a single source of information when making investment decisions, preferring by far to rely on experts (advisor, portfolio manager, bank staff), compared to financial documents such as a prospectus. Informal advice (by relatives and friends) remains the most common investment habit among investors, followed by self-managed decisions and reliance on a professional support.
Advisors' competences are both the main driver of the choice of the expert and the main expectation investors have from financial advisors. Most investors are used to have long-standing relationship with their financial advisor and to follow the advice received without any double-check. ... more
Among investors, more than 40% are aware of the characteristics of financial advice whilst about half of them can correctly define the implications of a suitable recommendation: interestingly, slightly more than 20% believes that a suitable financial recommendation prevents from capital losses. Advisors' competences are both the main driver of the choice of the expert and the main expectation investors have from financial advisors. Almost 80% of investors receiving financial advice keep ignoring that the service is remunerated and, in the vast majority of the cases, are not willing to pay for it. More than half of respondents have a long-standing relationship with their financial advisor, having experienced a switch (if any) predominantly because the professional was no longer available. The majority of the sample is not used to double-check the advisor's recommendation, while only 5% of the investors always ask for a second opinion. However, most respondents are not willing to follow a recommendation they do not understand, as they seek explanation from the consultant and/or to gather clarifying information from alternative sources. Over 70% of the investors relying on financial advice have met their advisor at least once in the last year, either following their own or their advisor's initiative
FOCUS Apart from a small share of investors holding sustainable and responsible products, knowledge and interest in SRIs are still limited. Informed investors and holders of SRIs are on average more frequently willing to hold SRIs even if this entails forgoing financial performances. The main deterrents from SRIs are reported to be lack of savings and mistrust, the latter encompassing also ‘greenwashing' concerns. ... more
About 40% of respondents report to be somehow informed about SRIs (this share halves when excluding those who have just heard about it), mainly thanks to the media and the Internet. Only 5% of investors hold SRIs: the proportion rises to 18% among informed advised investors, who report to have been recommended such investments by their advisors in slightly more than 10% of the cases. About 40% of the interviewees are not able to express any opinion on the relevance of the ESG factors that can be associated to SRIs (this share drops to less than 10% among informed investors), while the remaining mainly point to environment protection and social goals. 60% of interviewees are highly concerned about climate changes, while 33% display high social preferences (as signalled by their high propensity to give to good causes without expecting anything in return). Potential interest in SRIs involves 40% of the interviewees, that are willing to forgo financial performance in 13% of the cases. These figures hit 80% and 40% respectively for the sub-sample of informed investors. Interestingly, 66% of respondents are unable to express a view about SRIs past financial performance, while the proportion of those reporting similar or better returns than alternative options rises substantially among informed investors and among holders of SRIs. The main deterrents from interest in SRIs seem to be lack of savings and mistrust, the latter entailing several dimensions as ‘greenwashing' concerns, ineffectiveness of SRIs and inclination towards keeping personal engagement separate from financial choices. Wealth, financial knowledge, social preferences, climate concerns and consideration of ESG factors as well as tolerance to short-term and tolerance to small losses are among the factors positively associated with familiarity and interest in SRIs, whilst risk aversion and loss aversion are among the variables showing a negative correlation.
Italian financial decision-makers keep showing a low level of financial knowledge and are far from being savvy investors, as highlighted by data on their risk literacy. As for financial control, the vast majority does not have either a financial plan or a budget, although saving (either on a regular or on an occasional basis) remains a common habit. Financial market participation is low while informal advice prevails among investors.
Financial knowledge and best practices are in general more likely among wealthy individuals, residents in the north of Italy as well as among the youngest, the highly educated and those with numerical skills. In addition, they are positively associated with behavioral traits such as financial self-efficacy, optimism, self-control (as opposed to procrastination), financial easiness (as opposed to financial anxiety) and tolerance to small/short-term losses (as opposed to total loss aversion and risk aversion). Trust in financial intermediaries confirms to be a key driver not only for market participation but also for demand for financial advice. Interestingly, also the attitude towards mental accounting turns out to be positively correlated with financial control and investing
The Report was prepared by: Nadia Linciano (coordinator) - CONSOB, Head of the Economic Studies, Research Department (n.linciano@consob.it) Daniela Costa - CONSOB, Economic Studies, Research Department (d.costa@consob.it) Monica Gentile - CONSOB, Economic Studies, Research Department (m.gentile@consob.it) Paola Soccorso - CONSOB, Economic Studies, Research Department (p.soccorso@consob.it)
The opinions expressed in the Report are the authors' personal views and are in no way binding on Consob.
