AFM Consumer Monitor 2022 Q4: Investors

AFM Consumer Monitor 2022
Q4 | Investors
17 February 2023
Mara Verheijen, MSc. dr. Karolien van den Akker Joost Leenen, MSc. dr. Millie Elsen

2
Background
The AFM advocates for fair and transparent financial markets. As an independent conduct supervisor, the AFM contributes to sustainable financial well-being in the Netherlands. The Consumer Monitor provides insight into developments in consumer behavior over time. The monitor was launched in 2004 and has been conducted every six months since then. The primary objectives of the Consumer Monitor are:

• to describe the behavior and attitudes of financial consumers;
• to describe market and product aspects in the financial market.
  Guide to this report
  This report contains the results of the Consumer Monitor conducted in October and November 2022 (Q4 2022) on the sub-topic "Investing". The fieldwork was carried out in the online LISS panel between 3 October and 29 November 2022. The questionnaire was presented to a (random) sample of Dutch investors. The questionnaire covered various topics, including the forms in which people invest, the motivations for investing, the level of activity, and risk perceptions. The differences between groups of investors (such as age groups) mentioned in this report are statistically significant (unless stated otherwise).

Contents
Introduction
Introduction 2
Investors and investment forms 3
Investor motivations 11
Level of activity 18
Risks and risk perceptions 22
Receiving and seeking information 27
Characteristics of investors 32
Investors who recently stopped 36
Research method and sample description 41

Important: In 2022, the Consumer Monitor was conducted for the first time in the probability-based LISS panel of Centerdata. Questions and question formulations were also adjusted (simplified). As a result, the results of the 2022 measurement are not well comparable with the results of earlier measurements.

Investors and investment forms
3

More than one-fifth of Dutch households have investments 4 Question: Do you have money invested in investment funds, shares, derivatives, bonds, or other securities?* Basis = all respondents (nationally representative sample, 18+), n = 5681 In 22% of households, one or more persons invest. *The following are not included:

• Cryptocurrencies (such as Bitcoin, Ethereum, or stablecoins)

• Investments linked to your mortgage

• Investments linked to your pension via your employer (e.g., a pension fund). Note: Investments with (additional) pension as a goal on a regular investment account (box 3) or a tax-advantaged investment account (box 1) are included.

• Approximately 1 in 5 Dutch people (18%) has their own investments. The largest group – about half of the Dutch population – has never invested and has no plans to do so.

• The vast majority of investors (94%) invest in one way.

• 7 out of 10 investors invest independently. For two-thirds of investors, this is their primary way of investing.

• Approximately 3 out of 10 investors invest via wealth management, and only a small portion (4%) does so via a financial advisor.
  Two-thirds of investors invest primarily independently Question: How do you invest? (1) I invest independently (i.e., 'execution only') without the advice of a financial advisor, (2) An investment advisor gives me advice* on my investment portfolio, (3) I invest via wealth management. The wealth manager executes transactions for me. I do not execute any transactions myself. (Further explanation is in the box to the right.) For investors who invest in multiple ways, the primary method was determined with the follow-up question: "Indicate for each method what portion (in percentages) of the total value of your investments you invest this way" (and in case of two or more equal (highest) percentages: "Which method do you consider your primary way of investing?"). Basis = all investors, n = 635 *An advisor gives advice on the investment strategy to follow. Based on this advice, you then decide yourself which investments to buy or sell. With wealth management, your investments are managed and your money is invested in securities (such as shares, bonds, and options). You agree in advance what the manager is exactly allowed to do. The manager is authorized to execute transactions up to a certain limit and then decides themselves whether to buy or sell securities. They only tell you afterwards what they have done.

• Shares (58%) and investment funds (53%) are the most chosen investment forms, followed by index investment funds, index trackers, or Exchange Traded Funds (28%) and bonds (16%).

• Independent investors invest more often in shares (69%) than investors who use wealth management (41%). Investors who use wealth management invest more often in investment funds (73%) than independent investors (44%).
  Basis = all investors, n = 635; investors who invest independently, n = 428; investors who invest via wealth management, n = 213 (investors who invest with advice not shown due to low number of observations) Shares and investment funds are the most popular investment forms Question: In which forms do you invest [if you (also) invest via wealth management: and/or is investment done for you]? Think of all the investments you have. Click here for an explanation of the forms. Multiple answers possible.

• For nearly one-third of investors (29%), the total value of their investments is less than €5,000. Approximately one-fifth (21%) say their investments are worth more than €50,000.

• The figure to the right shows what portion of their total investment portfolio independent investors have invested in a certain investment form. For investors who invest in shares, in nearly half of the cases (47%), the investment portfolio consists mainly or entirely of shares (75 to 100%). For investors who invest in bonds, the bonds often form only a small part of the investment portfolio.
  3 out of 10 investors have investments worth less than €5,000 7 Question (left): What is the current total value of your investments? *The following are not included: (1) cryptocurrencies (such as Bitcoin, Ethereum, or stablecoins), (2) investments linked to your mortgage, (3) investments linked to your pension via your employer (e.g., a pension fund; see page 4 for further explanation). Question (right): If you set the total value of the investments you invest independently at 100%, what portion (in percentages) do you invest in... Basis (left figure) = all investors, n = 635 Basis (right figure) = investors who invest independently, n = 428

• Independent investors with shares have shares in an average of 10 different companies (median = 4). Approximately 3 out of 10 independent investors (27%) have shares in 1 or 2 companies. 2 out of 10 independent investors (19%) state they have shares in more than 10 companies.

• Independent investors with bonds have bonds from an average of 3 different companies or countries (or maturities) (median = 2). More than 6 out of 10 independent investors (63%) have bonds from 1 or 2 companies or countries (or maturities).
  Approximately 3 out of 10 investors have shares in 1 or 2 companies 8 Question: You indicated that you invest in shares*. In how many different companies do you have shares? [Think only about the investments you invest independently.] If you do not know exactly, make an estimate. *A share is an interest in the capital of a company. The shareholder is therefore a co-owner of the enterprise. Basis (left figure) = investors who invest independently in shares, n = 286; Basis (right figure) = investors who invest independently in bonds, n = 54

• Most independent investors with shares invest in companies in the technology sector, followed by the financial sector, industry, consumer goods or services, and the energy sector.

• A quarter of independent investors (24%) do not know what portion of their investments is in Dutch companies or indices. A quarter thinks it is less than 25%, and another quarter thinks it is at least 75%.
  6 out of 10 independent investors with shares invest in companies in the technology sector 9 Question: In which of the following sectors [is the company/the companies] in which you have shares active? [Think only about the investments you invest independently.] Multiple answers possible. Basis (left figure) = investors who invest independently in shares, n = 286 Basis (right figure) = investors who invest independently, n = 428

• A quarter of investors also own crypto.1

• Of the investors with cryptocurrencies, two-thirds (67%) say the value is currently less than €1,500. More than a third (36%) state that their cryptocurrencies currently represent a value of less than €500.
  A quarter of investors also have crypto, usually with a value lower than €1,500 10 Question (left figure): Do you have cryptocurrencies (such as Bitcoin, Ethereum, or stablecoins)?
  Question (right figure): What is the current total sales value of your cryptocurrencies?
  1 Note that investors who only own cryptocurrencies (and no other investment forms) are not in the sample.
  Basis (left figure) = all investors, n = 635
  Basis (right figure) = investors with cryptocurrencies, n = 127

Investor motivations
11

• For 4 out of 10 investors, the low interest rate on savings products played a large or even decisive role in the decision to start investing.

• The low interest rate is thus the most frequently mentioned reason, followed by gaining extra financial possibilities, which played a large or decisive role for a third of investors.

• The vast majority of investors (85%) state that influencers and (online) advertising played no role in their decision to start investing.
  Basis = investors who know how long they have been investing, n = 619 Low interest rate most frequently mentioned reason to start investing Question: To what extent did the reasons below play a role in your decision to start investing at that time?

• Half of the investors have been investing for more than 5 years (the average is 11 years).

• For investors who started investing two years or less ago, the low or (possibly future) negative savings interest played a more important role in the decision to start investing than for investors who started investing longer ago. They also more often state that they were pointed out by their environment, did not want to fall behind others, it was easy to open an account, or that they had actually planned to start investing for longer.
  Low interest rate was especially the reason for new investors to start investing 13 Question: To what extent did the reasons below play a role in your decision to start investing at that time?
  Basis = investors who know how long they have been investing, n = 619 = significant difference * * * * * * *

• For more than a third of investors (36%), the low interest rate on savings accounts was a reason to invest more.

• The remaining investors (63%) said they did not start investing more or did start investing more but did not take the low interest rate into account in that decision.
  More than a third of investors started investing more due to the low interest rate Question: Did you start investing more because of the low interest rate on your savings account(s)?
  Basis = all investors, n = 635

• On average, investors who invest independently mentioned 2.1 reasons for their choice to invest independently. They most often mentioned that they want to manage their investments themselves (56%). Other important reasons are that they find it fun or challenging to do this themselves (44%) and that the costs are lower (39%). Lack of knowledge of other options (investing via an advisor or wealth manager) is almost never mentioned (1%).
  Being able to manage investments oneself and finding investing fun or a challenge are the main reasons for choosing independent investing 15 Question: Why did you choose independent investing? Choose up to three reasons. What was your most important reason for choosing independent investing? Basis = investors who invest independently, n = 428

• The majority of investors have wealth preservation or growth as a goal (56-62%). This is the most frequently mentioned reason, followed by supplementing the pension or income and/or retiring earlier (40-47%).

• Independent investors invest more often for the pleasure or challenge of investing itself.
  Wealth preservation or growth is the most frequently mentioned investment goal 16 Question: With which goal(s) do you invest [independently/with advice from a financial advisor/via wealth management]? Basis = investors who invest independently, n = 428; investors who invest with advice from a financial advisor, n = 32; investors who invest via wealth management, n = 213 Note: The number of observations is low (n = 32)

• Most investors have one (independent: 42%, with advice: 67%, via wealth management: 55%) or two (independent: 30%, with advice: 17%, via wealth management: 26%) investment goals.

• In these figures, not only whether one has the goal is taken into account, but also what portion of the total value of the investments is invested with the respective goal. On average across all investors, about 40% of the total value is invested with wealth preservation or growth as the goal.
  Wealth preservation or growth is generally the most important investment goal of investors 17 Question: If you set the total value of the investments you invest with the advice of a financial advisor at 100%, what portion (in percentages) do you invest then...? *Here, investors who do not have the goal (0%) and investors who have the respective goal as their only goal (100%) are also included. Basis = investors who invest independently, n = 428; investors who invest with advice from a financial advisor, n = 32; investors who invest via wealth management, n = 213 Note: The number of observations is low (n = 32)

Level of activity
18

• Approximately half of the investors (48%) check the value of their investments weekly or more often.

• Independent investors check the value of their investments more often than investors via wealth management.

• Investors who describe themselves as risk-taking check the value of their investments more often than investors who see themselves as cautious.

• 1 in 12 investors (8%) checks (almost) never the value of his/her investments.
  Approximately half of the investors check at least weekly the value of their investments 19 Question: How often do you on average check the value of your investments you have via [independent investing/investing with help of an investment advisor/investing with help of a wealth manager]? This concerns the value of your own investments, not the (stock market) price in general. Basis = all investors, n = 635 *Investors with financial advice not displayed due to low number of observations

• Investors made an average of 13 buys and/or sells in the past year (median = 4 transactions). A third of investors (32%) did not execute any transactions in the past year.

• Risk-taking investors made more transactions than cautious investors. Of risk-taking investors, 60% say they made more than 5 transactions in the past year, while this is only 25% among cautious investors.

• Investors who executed more than 5 transactions did so more often via an app (48%) than investors who executed fewer transactions (32%). The latter group did transactions more often via personal contact with the provider (11% vs. 3%).
  More than half of the investors executed a maximum of five transactions in the past year 20 Question (left and middle): Have you made one or more transactions (buys and/or sells) in the past 12 months? Think of all the transactions you have made yourself (with or without an advisor). Transactions you have made via wealth management do not count. If you do not know exactly, make an estimate. Question (right): In which way(s) did you make these transactions in the past 12 months? Basis = investors who invest independently and/or invest with advice... who know/how many transactions they have made, n = 430 (left/middle figure); who have made transactions and know the number, n = 275 (right figure)

• More than 4 out of 10 investors (43%) regularly deposit a specific amount of money on their investment account; usually once a month (35%).

• A quarter of investors state they do deposit, but not regularly. A third does not (currently) put extra money on their investment account.
  More than 4 out of 10 investors regularly deposit a specific amount on their investment account Question: Do you regularly deposit a specific amount of money on your investment account? [Think of all the investment accounts you have.] Basis = all investors, n = 635

Risks and risk perceptions
22

• Nearly 1 in 5 investors (18%) states they would no longer be able to make ends meet if the value of their investments were to drop by 25%.

• For a vast majority (78%), such a drop in value would have consequences, but they would still be able to make ends meet.
  Basis = all investors, n = 635
  Nearly 1 in 5 investors says they would no longer be able to make ends meet if the value of their investments dropped by 25% Question: Suppose the value of your investment drops by 25%, so you do not reach your investment goal. Would this then have consequences for your standard of living?

• Dutch government bonds are seen by independent investors as the least risky investment form by far. Nearly 6 out of 10 independent investors think that investing in this investment form involves no or a very small risk.

• Investing in Bitcoin is seen on average as the most risky: 85% of respondents who invest independently estimate the risk that someone investing in Bitcoin loses a (large) part of their investment to be large or very large.1
  There are large differences in risk perceptions between investment forms 1 Note that investors who only own crypto (and no other investment forms) are not in the sample.
  Question: Can you indicate per investment how large you estimate the risk that someone investing in it loses a (large) part of their investment? Basis = investors who invest independently, n = 428

• 7 out of 10 investors who know/want to say how much (savings) money they have (69%) state they have more than €10,000 (savings) money; approximately 3 out of 10 more than €50,000. 2 out of 10 investors state they have less than €5,000 (savings) money.

• Investors with a higher total value of their investments also have, on average, more (savings) money.
  2 out of 10 investors state they have less than €5,000 (savings) money 25 Question: How much (savings) money do you have in total in a checking account, savings account, savings deposit* and in cash? *A savings deposit is a savings form with a fixed term and a fixed interest rate. The term can be a few months to ten or twenty years. Basis = investors who know/want to say how much savings money they have, total: n = 519 (18% unknown), broken down by value of investments: n = 514 (for 5 investors the total value of investments is unknown)

• 6 out of 10 investors have a mortgage on their home. The vast majority of investors with a mortgage (95%) state they have equity.

• On average, investors give their financial situation a grade of 7.7. Less than 1 in 10 investors (7%) gives their financial situation a 5 or lower.
  Investors give their financial situation an average grade of 7.7 26 Question (left): Do you have a mortgage on your home? Question (middle): What is the value of your home compared to the value of the mortgage? If you have multiple mortgages, such as a second mortgage on a second home, answer the question for the home you live in. Question (right): What grade would you give your financial situation at this moment? Your financial situation is good if you can pay all bills, you can feel secure about your financial future, and you can make choices so you can enjoy life. Basis (left/right figure) = all investors, n = 635; basis (middle figure) = investors with a mortgage, n = 377

Receiving and seeking information
27

• 6 out of 10 investors (60%) who invest via wealth management state that their provider makes it clear annually whether their investment goal is still achievable. According to about one-sixth (16%), the provider does not do this, and a quarter (24%) does not know.

• Approximately half of the investors whose provider gives annual insight into the achievability of their investment goal (49%) receive this information via a personal web page. Approximately a quarter (27%) has regular conversations with a financial advisor, and a quarter (26%) receives the information via an app.
  6 out of 10 investors via wealth management state that their provider gives annual insight into the achievability of their investment goal 28 Question (left): Does your provider make it clear to you annually whether your investment goal is still achievable? [Think about your main provider for wealth management for this question.] Question (right): How do you receive this information from your provider? Basis (left figure) = investors who invest via wealth management, n = 213 Basis (right figure) = investors who invest via wealth management, whose provider annually makes it clear whether the investment goal is still achievable, n = 129

• 8 out of 10 investors have seen information about the level of investment costs in 2022 (1 in 10 has not, and 1 in 10 does not know).

• Most investors (69%) state that their provider pointed them out to the cost information. A much smaller group (14%) has requested and/or searched for the information themselves.

• Investors who saw information about investment costs generally found the information relatively easy to find. Only 2% found the information difficult to find.

• 7 out of 10 investors who saw the information did nothing with it. Investors who did take action mostly compared the costs of different providers (14%) and/or searched for more information about the costs of the provider and/or the investment product (resp. 13% and 12%).
  7 out of 10 investors who saw information about investment costs in 2022 did nothing with the information 29 Question (left): Did you see information about the level of investment costs from [main provider] in 2022? This concerns, for example, the costs for services, the costs for your financial instruments, and the total of the costs you are to receive prior to a transaction. Question (middle): How easy or difficult was the information about the costs to find? Question (right): What did you do with the information about investment costs? Basis (left figure) = all investors: n = 635 Basis (middle and right figures) = investors who saw information in 2022 about the level of investment costs, n = 498

• Nearly two-thirds (65%) of the investors who invest independently or with advice (who in