Trends in household wealth and savings
In Italy household net wealth remains stable at its 2012 level, whereas gross saving rate keeps declining below the euro area average. ... more
Discrepancies between Italy and the Eurozone persist also in the composition of financial assets, especially with respect to the holdings of insurance and pension products, and in the level of indebtedness, with Italian households exhibiting more favourable figures. Over 2011-2017, Italy has caught up with the average of the euro area as for the access to some banking products and services, while still lagging behind with respect to the acquaintance with digital means of payment.
The 2018 CONSOB Observatory: socio-demographics and personal traits of sampled financial decision makers
The 2018 CONSOB Observatory ‘The approach to finance and investment of Italian households' collects data from 1,601 households, representative of the population of Italian retail financial decision makers, with a focus on individual psychological traits and inclinations. ... more
As extensively acknowledged by researchers and practitioners, financial behaviours are deeply grounded into individual psychological traits and inclinations. According to indicators computed on the basis of respondents' self-evaluation, the majority of the sample prefers numerical information, shows the need for cognition, is inclined to financial anxiety. Moreover, the perception of self-efficacy and self-control as well as optimism and trust are common. Finally, in line with the behavioural investors' type (BIT) literature, respondents are asked to report about some personality traits that may affect financial choices. A preliminary inspection based on pairwise correlations among socio-demographic characteristics and personal traits shows that preference for numerical information is more frequent among men and highly educated individuals, who also show a higher need for cognition. Financial anxiety is more common among women and the lowest educated, whilst being negatively correlated with the attitudes potentially underpinning personal engagement in challenging tasks, self-confidence and optimism. The economic situation (as proxied by income, financial wealth, house property and employment status) is positively correlated with all the selected traits, except financial anxiety.
Financial knowledge and risk preferences
Italian households' financial knowledge is still very low, as shown by the results of a test involving both basic notions recurrent in everyday life and advanced concepts. ... more
Actual and perceived financial knowledge display some misalignment, as unveiled by both ex-ante self-assessment (before testing their actual literacy more than 40% of interviewees rate themselves as highly knowledgeable) and ex-post self-assessment (i.e. self-evaluation after the test). Among the features that can be deemed as both a precondition and a complement of financial literacy (so called numeracy understanding), percentages are widely understood while probabilities remain obscure for almost 80% of the interviewees. Risk literacy, as captured through familiarity with financial products and their riskiness, is not very widespread either. The proportion of respondents reporting to be acquainted with specific financial assets is never higher than 60% (with government bonds remaining the instrument most widely known after bank and postal accounts) while only 10% of the sample fare well in ranking financial assets by their riskiness. Financial knowledge, both actual and perceived, and numeracy understanding are positively associated with education, preference for numerical information and need for cognition, whilst being negatively correlated with financial anxiety. Interestingly, both overconfidence (as defined with respect to the ex-post self-assessment) and the attitude towards upward mismatch result significantly and negatively associated with financial knowledge. Individual background in financial matters is mainly due to professional experience, household budgeting and personal interest, while formal education and investment experience seem to play a minor role. As for risk attitudes, half of the interviewees show to be ambiguity averse, while about 45% state they wouldn't tolerate any capital loss. Consistently, the vast majority of interviewees is not willing to take risk when making financial decisions. Risk and loss aversion are more likely among older and financially anxious individuals, people with lower formal education and less wealthy. On the contrary, unwillingness to take risk is negatively associated to high financial knowledge, high numeracy understanding, preference for numerical information and need for cognition.
Financial control and saving
Financial control, i.e. budgeting, planning and monitoring, is key to sound choices and to individual financial welfare. Italian households are not widely used to engage in good financial control practices yet. ... more
About 47% of interviewees have a budget, reported to be met in most of the cases, while less than one third take written notes of household expenses. However, a careful consideration of purchases, timely bill payment and debt repayment appears to be the norm for the majority of the sample. Finally, less than one third of respondents assert to have ever had a financial plan and to check for its progresses. Financial control is more frequent among individuals recording higher levels of financial knowledge and numeracy understanding and among individuals inclined to numerical information and to self-control; feelings of financial anxiety may instead be a deterrent. Among those not having a plan, less than 10% admit the importance of financial planning, about 65% believe it is useless, whilst around 25% are not even able to highlight what prevents them from planning. One fifth of the sample can't figure out how they would cope with a hypothetical fall in the household income, whilst more than 30% would lower their current standards of living (in this respect, 58% of the households are in debt for current expenses). Saving (mainly driven by precautionary reasons) is undertaken by less than 40% of the interviewees on a regular basis and by 36% of the respondents on an occasional basis; 25% of the sample is not able to save at all mainly because of binding budget constraints. Not surprisingly, saving is more likely among individuals used to financial control, as well as among wealthier and more literate respondents. A better-than-average self-assessment of one's own financial capabilities (including one's own saving capabilities) and some personal traits such as self-efficacy and self-control may also play a relevant role.
Investment choices and investment habits
At the end of 2017, about 30% of the Italian households participate in financial markets (i.e. hold at least one investment product). ... more
Based on the reported breakdown of financial assets, mutual funds and government bonds weigh the most in households' portfolios, after bank and postal savings. The propensity to invest is more likely among individuals with higher formal education, resident in the North and with higher financial knowledge and numeracy understanding. As for personal traits, beyond trust and optimism, preference for numerical information, need for cognition and tolerance to short-term losses are among the factors positively correlated with participation, whilst risk aversion and loss aversion go in the opposite direction. Ethical and socially responsible products (or socially responsible investing – SRI) are not broadly known yet, as more than 60% of respondents have never heard about them, nor are they attractive, as only less than one third of interviewees plead interested after receiving information about them. Information on financial products and services is deemed to be fundamental to investor protection: ascertaining the extent to which investors rely on official sources of information is therefore of great interest to regulators and supervisors. In fact, only 25% of the interviewees refer to regulatory information (i.e. financial prospectus), while financial experts (mainly bank tellers), unofficial channels (mainly friends and colleagues) and specialised magazines are the most frequently mentioned. Information valued as useful predominantly refer to risk of capital losses and costs. Among investors reporting a single investment habit, 50% rely on friends and relatives for support to investment choices (so called informal advice); 28% make decisions on their own (self-directed investors); about 20% seek for professional support or delegate to an expert. People acting as advisors (either professionals or trusted persons) are expected to act in the investors' best interest, to be competent and clear. For more than 40% of the respondents, it is important to be relieved by financial anxiety. Self-directed investors are more frequent among individuals living alone, showing preference for numerical information and self-assessing their financial knowledge and capabilities as better-than-average, whereas informal advice is more widespread among anxious and loss averse individuals. Monitoring one's own portfolio over time is a key feature describing individuals' attitude towards the investment process. About 40% of the investors do not monitor nor in most of the cases are they informed about the previous year performance of their investments. Among those reporting to keep track of their choices, information about past performances seem to be more salient than costs disclosure. Investment monitoring is more likely among aged, highly educated and financially literate people as well as among investors inclined to ask for professional support, while financial anxiety, loss and risk aversion as well as inclination to informal advice show a negative correlation.
The demand for investment advice
More than 50% of interviewees are able to identify neither the contents of the service of investment advice nor the characteristics of the independent advice service. ... more
This lack of knowledge is likely to affect also the individual attitude to shop around for advice. Indeed, the main driver of the choice of the expert (either a professional advisor or, more generically, financially skilled staff) is the recommendation from one's own bank, followed by the range of products available and the perceived reliability of the advisor. The cost of the service is mentioned by only around 5% of the investors seeking for support. Indeed almost 80% of those relying on professional advice either state the service is free or don't know whether it is compensated, while overall about 50% are not willing to pay for it. Willingness to pay for investment advice rises with formal education and financial knowledge. As for the client-advisor relationship, the most part of respondents consider very important to disclose to the advisor their risk capacity and expectations about the investment performance, whereas communication about financial knowledge and experience is felt to be less important. More than 60% of investors follow the professional advice they received, while less than 10% ask for a second opinion. About 30% of investors report to have had no contacts with their advisors in the previous year. Those having regular meetings refer that conversations topics mainly focus on portfolio performance and portfolio adjustments driven by market trends. Finally, in case of market downturn only 20% of investors are used to meet or to be called by their advisor.
Focus: the Theory of planned behaviour and the intention to learn finance and to monitor the household budget
According to the Theory of planned behaviour (TPB), intentions are the precursors of a specific behaviour. This Report applies TPB to individual intentions to learn more about finance and to enact a proper monitoring of household expenses. ... more
They depend on attitudes (i.e. one's own overall evaluation of the behaviour), social pressure (feeding into social norms and motivation) and behavioural control (i.e. perception of one's own ability to enact the behaviour). All these psychological constructs are backed by background factors, such as individual features (e.g. personality traits or experience), social features (e.g. education, age, gender and income) and information features (e.g. knowledge and media). In this framework, intentions towards a specific behaviour can therefore be boosted by intervening on attitudes, perceived social pressure and feeling of control. This Report applies TPB to individual intentions to learn more about finance and to enact a proper monitoring of household expenses.
Behavioural beliefs underpinning intentions to learn more about saving and investment can be related to two components: behavioural beliefs about the consequences of learning more and judgments about these consequences. Based on the opinions elicited on these components, only 20% of the interviewees (more frequently women) may be classified as having a high evaluation of the intention to learn more about finance. The motivation to learn more about finance may come from social pressure, resulting from both the individual perception about how other people would like the person to behave and the individual consideration of other people's opinion. The overall score resulting from the combination of these two components shows that the social pressure to learn more is felt to be high by less than 10% of the sample. When it comes to individual evaluation of one's own ability to pursue the proposed behaviour, almost 25% of the interviewees perceive a high degree of control. Overall attitude and perceived control underlying the intention to learn more about finance are higher among women and display a positive correlation with financial wealth, inclination towards numerical information, self-efficacy and optimism, actual and perceived financial knowledge and capabilities. The contrary holds as for age, overconfidence, financial anxiety, risk and loss aversion. As for perceived social pressure, high education and financial anxiety are among the factors showing a positive association, while income, risk aversion and some personal attitudes play in the opposite direction. The breakdown of the intention (resulting from the combination of attitude, perceived social pressure and perceived control) over the spectrum ‘strong disagreement' - ‘strong agreement' unveils that about 25% of the interviewees report a high disposition towards learning about finance; this figure is slightly lower among women.
Slightly more than 40% of the sample shows a low or very low overall attitude towards budget monitoring, whereas peer pressure and the level of control are felt to be low respectively by 80% and 20% of the interviewees. Attitude and perceived behavioural control are positively associated (among the others) with inclination to use numerical information, need for cognition, actual and self-assessed financial knowledge. Financial anxiety, while displaying a negative association with attitude and control, seems to positively correlate with perceived peer pressure. Intention to monitor the budget is strong for individuals showing to be highly in favour of tracking expenses, to perceive a high social pressure and to feel in control of the process.
The Report was prepared by: Nadia Linciano (coordinator) - CONSOB, Head of the Economic Studies, Research Department (n.linciano@consob.it) Valeria Caivano - CONSOB, Economic Studies, Research Department (v.caivano@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.
