00:00 London
Street shot
Lottery
sign
Various
- filling in lottery forms
Guide Voice: The
statistical chances of winning any lottery competition means that
they're always a long shot - yet around the world people continue
to take a risk on lotteries in the hope of achieving some sort of
financial windfall.
00:15 Policy
Briefing to Financial Services and Journalists - various shots
Guide Voice: A recent
policy briefing by researchers from the University of Warwick's
Institute of Applied Cognitive Science suggests that most investors
need to take more risks in their financial investments.
But are we comfortable with financial
risk?
00:27 Vox
Pops x 2
1)
Bearded Man: "No, probably not - very much err, try to get
as much money as I can but try to pay off the
mortgage
mostly".
2)
Blonde Woman: "I don't take financial risks because I
guess I've never been in the position where I felt I had
enough
grounded, sort of , finances in order to take the risk with extra
finances."
00:43 Exteriors
- Buildings in London Financial District
Swiss
Re
Bank
of England
Lloyds
of London
Guide Voice: Current
financial service culture is weighted toward providing conservative
solutions to people's investment needs - now Professor Nick Chater
and Dr Neil Stewart have developed a new theory of how people make
risky decisions.
01:01 SOT: Professor Nick Chater,
Institute for Applied Cognitive Science, University of Warwick
- "People don't have access to or anyway of
understanding the absolute value of, for example, a level of risk
or an amount of money or a length of time so when they're trying to
assess whether they want to take a risk or not, rather than look at
the absolute value of a risk or an amount of mone,y they are
relating those risks or amounts of money to other examples they can
think of . So they're able to think this course of action that I'm
going to take is more or less risky than some others I can think
of, but they've got no idea absolutely how risky they
are."
01:34 Various
views of policy briefing plus cutaways
Guide Voice: The
researchers are developing models of "financial
personalities" which give a much better understanding of how
people's decision-making processes work, exploring how consumers
are influenced by the contexts in which they take financial
decisions. This will help people to improve their financial
decisions and banks to improve their services.
01:56 SOT Professor Chater
- "I think currently its very hard for financial
advice to be given in a way that reflects the interest of the
people concerned, because its very difficult to pull out of people
what their true preferences are. Now one aspect of our research
reveals why that's so difficult, because people's preferences are
awfully dependent on the options they're currently faced with and
can be pulled around dramatically by presenting information to them
in different ways, so people have very unstable preferences and
that means that a major research project which we're engaged in at
the moment is trying to see if there's some other basis, some
deeper sense in which some people are more risk preferring than
others."
02:40 Signs
in London Financial District (City)
Lloyds
TSB
Leadenhall
Street
Bank
Station
Statue
outside Bank of England
Guide Voice: By helping
people make decisions that match more closely their real level of
risk tolerance, individuals come to less conservative assessments
on financial products and analysts believe that, if widely used,
the resultant increased level of confidence in risk taking could
substantially boost financial markets.
03:00 SOT: Professor Chater
- "We are concerned that there are, essentially,
many structural reasons why people don't invest - essentially
because of issues like habit and certainly certain sort of social
groups, for example ,are very under-exposed to the stock market;
but on top of that, according to the theory we're working with,
peoples' assessment of whether they want to take an investment in
the stock market is very much based on other such investments
they've made and if there aren't any of those they're in no
position to make such investments."
03:32 SOT: Mathew Sebag-Montefiore,
Strategist at Financial Consultants, Mercer Oliver Wyman -
"The theories coming out of Warwick University really
highlight that people should be taking more risk and they should be
using a wider comparison set when they are making those decisions.
So, in terms of the impact on financial markets, I think that what
it'll see is that they highlight that there's a need for a rise in
demand for the riskier product that could translate itself in one
of two ways - either higher stock market valuations as people start
to move into riskier products or, alternatively, that companies
tend to issue more stock so that there's an increase in supply and
available capitol, so boosting investment. So either way they
highlight good news for the economy, either through higher
valuations of the stock market or more investment as companies
issue more stock."
04:21 End
