Prepared For:

1
Dissecting the investor psyche what motivates
our clients

• Prepared For
• definition, IFSA Conference 2005
• By Linda McAvenna

2
Agenda

• Setting the scene
• An Australia-wide Snapshot in 2005
• Managed Investments in 2005
• 2005 vs 2004 trends in the marketplace
• Dissecting the investor psyche
• Financial Advice in 2005
• What have we learned

3
Setting the Scene
4
Purpose of the research

• This research is aimed at assisting IFSA members
  in identifying what motivates managed investment
  (managed fund and superannuation) customers
• With a view to
• encouraging higher participation in managed
  investments funds and superannuation
• improving investor sentiment
• building a more confident investor base
• educating and engaging the target market

5
An Australia-wideSnapshot in 2005General
Population Survey
6
An Australia-wide Snapshot in 2005

• General Population telephone survey n802
• A representative sample across Australia
• To determine incidence of managed fund and
  superannuation investors, and
• Usage of financial advisers across the Australian
  community nationally

Fieldwork conducted in July 2005
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Current investments
Base General Population n802

• Higher among
• Empty Nesters 32
• Hhold income 130k 36
• Use Fin Adviser 37

Q1. Do you currently have any of the following
investments either in your own name, in joint
names or as part of an investment club?
8
Currently use a financial adviser
Base General Population n802
Based on a representative sample of Australian
adults
Q7. Do you currently use the services of a
financial adviser or planner?
9
Likelihood of using a financial adviser over the
next 12 months
Based on Australian adults who do not currently
use a financial adviser
Base Do not currently of a financial adviser
n602
Mean Score /4
2.0
Q16A/26. In the next 12 months, would you say
that you are
10
Financial advice in 2006?
BaseGeneral Population n802
Q7. Do you currently use the services of a
financial adviser or planner?
Q16a. In the next 12 months, would you say that
you are
11
Managed Investmentsin 2005Investor Sample
12
Investor sample composition
Total n592 investors with managed funds and/or
superannuation

• n592 with managed investments
• n354 with 25k plus in managed funds
• n238 with 25k plus superannuation (but no
  managed funds)

Fieldwork conducted in July 2005
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Main issues currently influencing investment
decisions
Base All investors n592
Q1. From your perspective, what are the top
three issues currently facing the investment
markets that are affecting your investment
decisions?
14
Current investments
Base All investors 2005 n592
Q1. Do you currently have any of the following
investments either in your own name, in joint
names or as part of an investment club?
15
Perceived performance of investment options over
past 12 months
Base All investors 2005 n592
Q2. Overall, how well would you say each of the
following investment options has been performing
over the last year? Please use a scale of 0 to 10
where 0 represents extremely poorly and 10
represents extremely well.
16
Perceived performance of investment options by
whether currently use financial adviser
Base All investors 2005 n592
Q2. Overall, how well would you say each of the
following investment options has been performing
over the last year? Please use a scale of 0 to 10
where 0 represents extremely poorly and 10
represents extremely well.
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Managed InvestmentsKey Choice Factors
Importance vs. Performancein 2005
18
Managed Investments in 2005Key Choice Factors

• I trust my money is safe
• Delivers on promise
• Long term returns on investment (more than 5
  years)
• Fees and charges
• Reputation of investment operator / fund manager
• Transparency in all aspects of operations
• Risk associated with the investment
• Experts make the decisions
• Tax effectiveness
• Ease of accessing your money
• Ease of moving money / funds between products
• No stress
• Advice / recommendation from financial adviser /
  planner
• Ethically / socially responsible
• Range of product options available
• Short term return on investment (2-5 years)
• Awards or star ratings
• Level of minimum investment

Derived from qualitative investor research
conducted in 2004 on behalf of IFSA
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Q9 How important are each of the following
factors to you when considering whether or
not to invest in managed investments (managed
funds / unit trusts and superannuation funds).
Please rate each of the factors on a scale from
0 to 10 Q10 How satisfied are you with the
performance of your managed investments
(managed funds / unit trusts and superannuation
funds) in relation to each factor listed below.
Again, please rate each factor on a scale from 0
to 10
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Key Choice FactorsImportance vs. Performance in
2005

• I trust my money is safe
• Delivers on promise
• Long term returns on investment (more than 5
  years)
• Fees and charges
• Reputation of investment operator / fund manager
• Transparency in all aspects of operations
• Risk associated with the investment
• Experts make the decisions
• Tax effectiveness
• Ease of accessing your money
• Ease of moving money / funds between products
• No stress
• Advice / recommendation from financial adviser /
  planner
• Ethically / socially responsible
• Range of product options available
• Short term return on investment (2-5 years)
• Awards or star ratings
• Level of minimum interest

Importance
Average 6.3
Performance
21
Perceived performance of managed investments by
whether currently use financial adviser
10 yrs - 2004
22
2005 vs 2004Trends in the Marketplace
23
Perceived performance of investment options over
past 12 months
Base All investors 2005 n592 2004 n600
2005 only
Q2. Overall, how well would you say each of the
following investment options has been performing
over the last year? Please use a scale of 0 to 10
where 0 represents extremely poorly and 10
represents extremely well.
24
Importance of Key Choice Factors2005 vs. 2004
10 yrs - 2004
25
Performance of Key Choice Factors2005 vs. 2004
10 yrs - 2004
26
Key Trends 2005 vs. 2004Importance vs.
Performance

• I trust my money is safe
• Delivers on promise
• Long term returns on investment (more than 5
  years)
• Fees and charges
• Reputation of investment operator / fund manager
• Transparency in all aspects of operations
• Risk associated with the investment
• Experts make the decisions
• Tax effectiveness
• Ease of accessing your money
• Ease of moving money / funds between products
• No stress
• Advice / recommendation from financial adviser /
  planner
• Ethically / socially responsible
• Range of product options available
• Short term return on investment (2-5 years)
• Awards or star ratings
• Level of minimum interest

Importance
Average 6.3
Performance
27
Dissecting the Investor PsycheInvestor
Segmentation
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Dissecting the investor psyche - Investor
Segmentation
Confident - DIY
Its All Too Hard
Cruising Not Engaged
Confident Needs Support
Stressed Needs Support
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Confident DIY 19

• Predominantly male
• Wide investment portfolio including direct
  shares, managed funds, superannuation and
  investment property
• Most likely to have direct shares and investment
  property
• 3 in 5 have 100K invested in superannuation
• Optimistic about their financial future
• Clear financial goals
• Actively plan their finances
• Knowledgeable about financial matters in general
• Less likely to use a financial adviser (than some
  other investor segments)

30
Confident Needs Support 23

• Most likely to have managed funds
• 3 in 4 have 100K invested in superannuation
• Have clear financial goals
• Optimistic about their financial future
• Inclined to be over 50 years
• Actively plan their finances
• By far the most likely investor segment to use a
  financial adviser

31
Stressed - Needs Support 20

• Similar to Confident Needs Support investors
  in that they
• Do try to actively plan their finances
• and do have clear financial goals
• 1 in 2 have 100K invested in superannuation
• But are
• less optimistic financially
• more stressed about financial matters
• A higher incidence of under 40 year olds
• More noticeable amongst females
• More likely to use a financial adviser
• (than some other investor segments)

32
Cruising Not Engaged 21

• Most have direct shares
• 2 in 3 have 100K invested in superannuation
• Not particularly optimistic about their financial
  future but
• not stressed about it either
• Dont consider themselves experts in financial
  matters but
• would not pay anyone to manage their financial
  affairs.
• More likely to be over 50 years
• As with the Confident DIY
• Predominantly male
• Less likely to use a financial adviser

33
Its All Too Hard 17

• Least likely to have managed funds
• 1 in 3 have 100K invested in superannuation
• Believe financial planning takes up too much time
  prefer to spend their time on something else
• Dont enjoy making financial decisions
• Claim to be lazy when it comes to managing their
  finances
• Agree they dont pay enough attention to their
  finances
• Females most likely to be in this segment
• A younger (under 40) skew

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Financial Advicein 2005Investor Sample
35
Currently use a financial adviser
BaseInvestors n592
Based on Managed Investment customers
Q13. Do you currently use the services of a
financial adviser or planner?
36
Use of a financial adviser by investor segment
BaseInvestors n592
Q13. Do you currently use the services of a
financial adviser or planner?
37
Frequency of contact with financial adviser
Base Currently use a financial advisern336
Q17. How frequently does your financial
adviser/planner initiate face-to-face contact
with you? Would it be Q18. And how often does
your financial adviser/planner initiate other
types of contact with you, for example, by
telephone, fax, email or letter? Would it be
38
Satisfaction with financial adviser
Base Currently use a financial adviser n336
Mean Score /4
3.3
3.4
3.4
3.3
2.9
Q21a. How satisfied would you say youve been
with your personal experience with financial
advisers/planners?
39
Reliance on financial adviser
Base Currently use a financial adviser n336
Mean Score /6
4.4
4.5
4.5
4.3
4.2
Q22. Which one of the following statements BEST
applies to you?
40
Value of current adviser
Q25. I would now like you to consider the value
you place on your financial adviser or planner.I
am going to read out some more statements. Using
the same 0 to 10 scale, where 10 means you
strongly agree and 0 means you strongly
disagree, please tell me whether you agree or
disagree with each statement as they relate to
you. You may give any score between 0 and 10.
41
Value of currentFinancial Adviser / Planner
As a result of using a financial planner or
adviser I
Base Currently use a financial adviser n336
42
Value of currentFinancial Adviser / Planner cont.
Base Currently use a financial adviser n336
As a result of using a financial planner or
adviser I
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Likelihood of using a financial adviser over the
next 12 months
Investors who do not currently use a financial
adviser
Base Do not currently use a financial
adviser Investors n256
Mean Score /4
1.95
Q26. In the next 12 months, would you say that
you are
44
Financial Advice in 2006?
BaseInvestors n592
Q13. Do you currently use the services of a
financial adviser or planner?
Q26. In the next 12 months, would you say that
you are
45
What have we learned
46
Investor sentiment 2005 vs. 2004

• Over the past 12 months managed funds are
  perceived to have performed slightly better than
  superannuation or investment property, though not
  as well as direct shares
• Compared with 2004, satisfaction with managed
  investments (funds and superannuation) has shown
  a marked increase, (as has satisfaction with
  direct shares), though not surprisingly,
  satisfaction with property investment has slumped
• In 2005, managed investment customers appear to
  be
• less stressed than they were 12 months ago
• less concerned about fees and charges
• less concerned about the short-term (2-5 years)
  return on managed investments
• less concerned about awards or star ratings
• less concerned about the levels of minimum
  investments
• However, the biggest gap in terms of importance
  vs. performance relates to fees and charges
  which suggests that investors feel that more
  improvements can be made in this area

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The value of financial advice

• Nearly 1 in 4 Australian adults currently uses a
  financial adviser or planner, and this is set to
  rise in 2006
• Amongst adults with managed investments, the
  figure is significantly higher at close to 6 in
  10 this figure is also likely to increase in
  2006
• Satisfaction with financial advisers/planners is
  highest amongst investors who have a face-to-face
  meeting with their adviser/planner at least every
  six months
• Investors who currently use a financial
  adviser/planner are more satisfied with the
  performance of managed funds and superannuation
  over the past year (than investors who do not
  currently use one)
• And most importantly
• Satisfaction with managed investments, across all
  18 identified managed investment key choice
  drivers, is noticeably higher amongst investors
  who currently use a financial adviser/planner

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Thank you