The Barclays Wealth Insight report, which is based on a global survey of more than 2,000 high net worth individuals, showed respondents in Asia-Pacific have the most desire for financial discipline, while developed markets showed less of a desire for self-control over financial behaviour.
Taiwan topped the list, followed by Hong Kong in second place, Korea, Qatar and Japan in descending order. Developed countries such as Spain, Australia, the US, South Africa and the United Arab Emirates showed the least desire for financial discipline.
Across the rankings, the report revealed that Asian countries tend to have the personality profile of those with a higher desire for discipline. High net worth’s from Asia were, for example, high-risk taking, easily stressed, and prevention-focused. This played out in their attitudes towards trading which exemplified what the report described as “the trading paradox” – competing beliefs that to do well in the market frequent trading is necessary while simultaneously believing they are overtrading.
Globally, one third of those polled said that trading was frequently necessary to get a high return. However, Barclays found respondents were over three times more likely to believe that they trade too much. Almost half of respondents who believed they had to trade often to do well, thought that emotions forced them to do this.
The report also showed that investors use many types of strategies to control their decision-making process and use rules more in financial decision-making than they do in everyday life. The most popular rules included using cooling off periods and setting deadlines.
Age also played a role for investors with the desire for financial discipline markedly declining with age among global respondents. Over half of those aged 45 and under said they wanted more control over their financial behaviour, compared to just one quarter of over 65s. Younger respondents showed a habit of deliberately avoiding information about how the market or their portfolio was performing. 82% of those aged 45 and under did this, compared to 68% of those aged 65 and above.
Greg Davies, head of behavioural finance at Barclays Wealth, said following a path without self-control would result in overtrading where investors bought high and sold low. To prevent this, he said investors needed to take steps to exert self-control.
“This can only happen if we give something up, such as our flexibility to responding to market movements with knee-jerk reactions, or it may mean sacrificing a small amount of the performance of the ‘rational’ portfolio in order to ensure that we have a portfolio with which we are emotionally comfortable in the short term.”
