PTDoes your investor profile tell how you handle money?
Banks ask how much you are willing to lose before offering an investment. The thesis combined those questions with a finance quiz and a personal values questionnaire, answered by 630 people, to see what links most to the way people deal with money day to day. Explained in 12 screens.
Height = strength of each factor’s link with financial behavior (the β from Table 26, without the sign). Blue: investor profile. Red: power and pleasure, which pulled down. Striped: no clear effect.
The bank asks how much you can stand to lose, but not what you value
Since 2013, a rule from Brazil’s securities regulator (CVM) requires anyone selling investments to know the client: goals, financial situation and knowledge. This is the investor profile analysis, or suitability. Each bank writes its own questionnaire.
The thesis adapted the five questions from the questionnaire of Itaú, one of the institutions that supported the research, and gave each one five possible answers. Answer them and see what the 630 people chose.
This is not the bank’s classification (conservative, moderate, bold, aggressive): the bank also looks at assets and account activity, which the research did not have. It is not investment advice.
Ten values everyone holds, in different doses
Psychologist Shalom Schwartz arranged human values on a wheel: neighbors go together, opposites pull in different directions (tradition × novelty, for example).
The thesis used 21 statements about an imaginary person (the PVQ-21): participants said, from 1 to 5, how much that person was like them. Each value was compared with the person’s own average: what counts is what they value more than their other values.
Order and groups of the wheel as in the thesis’s Chart 7 (Schwartz, 2012). Click a value. Struck-through statements were dropped in the analysis because they measured the value poorly (Table 20).
Studies of investor profiles looked at personality and risk, not at values
In August 2022, the author searched the two largest scientific databases for articles on investor profile and behavior. Of 364 results, 18 remained that studied what comes before the decision to invest.
Main topic of the 18 articles (Chart 4; an article may have more than one topic). In red, what the author pointed to as little studied. None linked personal values to financial behavior, which the thesis takes as its gap.
An online questionnaire, through three channels, from March to June 2023
The invitation went out on the researcher’s social media, through a Mackenzie student consultancy in Campinas and among Itaú clients and employees. Only answers from people living in the state of São Paulo counted.
Widths proportional to the number of questionnaires (sections 4.4 and 5.1.1). 44 people from outside São Paulo dropped out, plus 21 who gave the same answer to over 80% of the values statements. The questionnaire was pre-tested with 35 people in 2021, and the analysis used structural equation modeling (SmartPLS).
People with education, income and financial knowledge well above average
Half men, half women, average age 41. But 54% had a graduate degree and 43% earned more than R$10,000 a month. On the five-question finance quiz, 72% got four or five right.
The author notes that much of the sample came from the researcher’s own network, which is in finance, and from people connected to a bank. So the results hold for this group, not for all Brazilians.
Twelve arrows pointing at the same target: taking care of money
The target is financial behavior, measured by five habits (how often, from never to always). The thesis bet that each of the ten values would have some link with it, and that financial knowledge and investor profile would have a positive link.
Your turn: pick up to three factors you think really mattered. The answer is on the next screen.
Three arrows passed the test: profile pulling up, power and pleasure pulling down
Each row is a factor. The dot is the strength of the link (β, in standard deviations); the bar is the range where the true value probably lies. If the range crosses zero, one cannot say there is an effect.
β and p from Tables 26 and 27. 95% range = β ± 1.96 × standard error (our calculation). Click a row.
The profile questionnaire explains almost all that the model explains; values add a little
Together, the factors explain 28.5% of the differences in habits between people, a result considered high in the social sciences. Take the ten values out of the model and the explanation drops to 25.8%.
The comparison uses the model with age, sex and education, as the thesis did: 25.8% without the values (Figure 7) and 28.6% with them (Table 27). Without controls, the model explains 28.5% (Table 26). The 2.8-point difference is our calculation; the thesis speaks of a “3% increase”. The rest depends on things the model did not measure.
Height = effect size of each factor (f², Table 26): how much the explanation worsens if it leaves the model. Profile 0.245; power 0.017; pleasure 0.011; knowledge 0.005 (no clear effect). The other eight values were between 0 and 0.003.
People who give more importance to money, status and pleasure take less care of their budget
Power and hedonism (pleasure, gratification for oneself) sit on the same side of the wheel, the personal-focus side. The habits the thesis measured are about planning: budgeting, saving, not spending everything. For the author, people who value life’s pleasures tend to be less controlled with money.
All in standard deviations, from the group average. Each bar = β from Table 26 × the chosen value; the total is the sum (our calculation). It shows the relative size of the links, not a prediction for one person nor a cause-and-effect relationship.
Knowing more about finance made no difference to habits, at least in this group
Earlier studies show that people who understand interest, inflation and risk handle money better. Before you look: in this group, those who got more finance questions right...
People by number of right answers to the five finance questions (Table 18): risk and return, interest, fixed income, budgeting and inflation. Almost everyone ended up at the top of the scale.
What the research suggests for those who ask and those who answer
Banks and brokers
Add questions about values and other psychological aspects to the profile questionnaire, to know the client better beyond income, assets and risk data.
Regulators
The author notes that suitability is still incipient: there is no standard questionnaire and each institution writes its own, with no transparency on how it is built and analyzed, which makes it hard to improve.
Financial education
Knowing the values of social groups can guide public financial education policies. Our reading: teaching concepts may not be enough when what weighs on habits is what people value.
Researchers
Repeat with a larger, random sample, at other moments in the country, test other techniques used with values (multidimensional scaling) and add personality traits to the model.
What this research does not say
- That it holds for everyone. The sample is a convenience sample, with many people from finance and banking, high education, high income and good financial knowledge. · according to the author
- How the bank classifies you. The research used only the profile questions; the bank’s process also uses assets and account activity. · according to the author
- Cause and effect. Everything was answered at one point in time, and the habits are those reported by the people themselves. · our observation
- A fine-grained measure of values. Each value was measured by one or two statements, three were left with only one after adjustments, and several had low reliability (Table 22). · our observation
- That profile and habits are clearly separate. One profile question, stage of life (budget in the red, balanced, building wealth...), is the one most aligned with the habits (correlation 0.47, Table 24). · our observation
Credits
SOUZA, Manuela Santin de. O perfil do investidor determina seu comportamento financeiro? Uma análise a partir de seus valores pessoais. Doctoral thesis (Business Administration), Mackenzie Presbyterian University, São Paulo, 2023. Advisor: Prof. Dr. Denis Forte.
Scholarship from Instituto Presbiteriano Mackenzie, support from MackPesquisa and data collection help from Itaú. Analyses in SmartPLS 4. This version simplifies the work; full tables are in the original.
Not investment advice.