Trust and risk-taking in a pension investment setting

Abstract

Purpose

The purpose of this paper is to examine the effect of trust on financial risk-taking in a pension investment setting. Further: to delineate the effects of varying levels of individuals’ financial knowledge and involvement on risk-taking, and on the trust-risk-taking relation.

Design/methodology/approach

Questionnaire to a subsample of Swedish bank customers, thereafter statistical analysis using multiple moderated regression.

Findings

Support the notion of trust being an influential variable in explaining risk-taking, and show that highly knowledgeable and highly involved individuals take on more risk. That individuals defined by knowledge and involvement have a different trust-risk-taking relation, however, not verified.

Research limitations/implications

Adds to the body of research emphasising the importance of “soft”, emotionally tilted input to consumers’ decision making, even concerning financial tasks such as risk-taking. Narrowly defined pension system environment may hamper generalisations since many constructs tested are situation specific.

Practical implications

From a practical perspective, individual investment behaviour is of increasing importance for the individual as retirement saver and for the financial industry in its attempt to tailor-make financial products to its customers. From a legislators’ perspective, the dimensions of knowledge and involvement describe the type of consumer supposedly most vulnerable: the uninterested individual with low levels of financial knowledge.

Originality/value

Tests the importance of trust on choice of risk level in a pension setting and is able to expand previous results into the area of consumer behaviour regarding pensions. The paper further manages to assess the specificities as regards the relation between trust and risk-taking for individuals with varying levels of knowledge and involvement.

Citation

Carlsson Hauff, J. (2014), "Trust and risk-taking in a pension investment setting", International Journal of Bank Marketing, Vol. 32 No. 5, pp. 408-428. https://doi.org/10.1108/IJBM-11-2013-0138