Surveys, interviews and focus groups are some of the methods the regulator has suggested when it comes to testing how much customers understand a firm’s communications.
But at Dynamic Planner, the financial planning software provider has gone a step further by conducting an eye-tracking experiment to understand how clients engage with past performance charts.
“Thinking about consumer duty, and consumer understanding as one of those outcomes, we wanted to do a bit more research into some of the charts that advisers present to clients,” says Louis Williams, head of psychology and behavioural insights at Dynamic Planner, and a visiting fellow at the University of Reading.
“Because of my experience of eye-tracking research in the past, that drove me to think a bit more about expertise, and how that can impact how clients look at data and graphs, compared to advisers who share this information with them.
“With past performance charts, there’s been a couple of interesting studies,” Williams adds. “For example, one study found that even with a disclaimer that past performance doesn’t represent what you may achieve in the future, clients would still use the information in a similar way, regardless of having that disclaimer.
“And when tracking eye movements, they spend a lot more time still on past performance, despite having that information. So we thought it would be interesting to look at past performance charts.”
A group of 60 took part in the study, with participants categorised into three groups: students, advised clients, and experts comprising advisers, investment analysts and academics from the University of Reading.
“One of the main manipulations of the experiment was presenting past performance charts with and without a benchmark,” Williams says.
“In some of our previous research we published with the University of Reading where we did an eye-tracker study, we found that people fixate on median lines when they’re looking at forecasts. They fixate on those quite a lot, even when they’re asked a question about the forecast and they don’t really need to use that median line to help them make a decision.”
What Williams’s study found is that when a benchmark was included, this reduced the likelihood of participants to stay invested when they had experienced positive returns, encouraging attempts to time the market. On the other hand, when performance had been negative, benchmarks significantly reduced feelings of concern.
The inclusion of a benchmark also appeared to increase the complexity of charts for the non-expert group of participants. Both students and clients required more time to make a decision when a benchmark was included, with the duration of time significantly longer than that needed for experts.
Meanwhile, experts showed no difference in the time taken to complete tasks within the experiment whether charts included benchmarks or not, due to being familiar with such graphs.
Eye movements
Participants wore an EyeLink II tracker headset to monitor their eye movements. The study found that clients spent more time, made more fixations and more visits to the last two months and the Y axis of performance charts than both experts and students.
