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Who wants to be a with-profits investor?, ask psychologists

Psychologists claim the reluctance of many gameshow contestants to take a gamble provides a clue to why with-profits products appeal to consumers.

According to behavioural psychology research commissioned by CIS, investors and contestants on shows such as Who Wants to Be A Millionaire? are generally risk-averse. The research found the impact of a loss on an investment is double that of a gain. An initial loss also stays in the mind of investors longer than subsequent losses.

The research, carried out by Kahneman & Tversky, suggested that because people focus on possible returns more than probable returns, they might save more if they better understood how with-profits works.

But they found that the with-profits name is a barrier to consumers. CIS suggests the name smoothed funds would help consumers understand the benefits better.

CIS general manager (marketing) Martin Clarke says: “Many consumers feel that 10 small gains are far more valuable to them than two large gains, in a similar way that analysts prefer to see companies show a steady increase in profits. I believe with-profits funds, or whatever they will be called in the future, will continue to provide the &#39phone a friend&#39 or &#3950-50&#39 comfort factor that attracts a wide range of investors.”

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