Interestingly, the report indicates that a need for increased financial discipline is likely to be felt most by those at the wealthiest end of the scale (10 million pounds), where 45 percent of respondents wish they had more self-control.
This is despite the report showing that those who want self-control are less likely to be satisfied with their financial situation.
The report, Risk and Rules: The Role of Control in Financial Decision Making, is based on a global survey of more than 2,000 HNWIs, and provides an in-depth examination of wealthy investors from a behavioral finance perspective.
It considers the different financial personality traits that exist amongst wealthy investors and the different self-imposed rules and strategies that they put in place to deal with these traits.
It shows that “emotional” trading can cost investors up to 20 percent in returns over a ten-year period, and the report shows that those who employ high strategy usage have on average 12 percent more wealth than those who do not use rules.
Globally, respondents in Asia-Pacific have the greatest desire for more financial discipline, particularly in Taiwan and Hong Kong.
In contrast, developed markets show less of a desire for self-control over financial behavior, as illustrated by respondents in Spain, Australia and the US.
In the Middle East, HNWIs show complex behavior toward investing and financial decision-making. In Saudi Arabia, HNWIs revealed a tendency to purchase illiquid assets to avoid the urge to sell investments when markets fall — 90 percent of respondents report this.
Saudi HNWIs also prefer to use rules and guidelines to help them make better financial decisions, with 96 percent of respondents saying that they use rules in financial decision-making.
On a regional level, Saudi HNWIs are inclined to set financial deadlines (96 percent) and have a high tendency to delegate financial decisions to others (90 percent).
In the UAE, there is also a willingness to delegate financial decisions (82 percent). Respondents in the UAE also favor setting financial deadlines for themselves (96 percent) and over three quarters (76 percent) think that buying and selling often will enable them to do well in the financial markets.
In Qatar, the report shows that respondents are by far the most likely to delegate financial decisions (98 percent). They also favor active portfolio management to achieve good results in the financial markets, and prefer to strategically time markets as opposed to adopting "buy and hold" strategies. Forty-two percent of Qatari HNWIs also say that they prefer to deal swiftly with bad investments and protect themselves from the downside.
Greg Davies, head of behavioral finance at Barclays Wealth, says: “Many people will be surprised to see that wealthy individuals have a desire for greater financial discipline, however with increased wealth comes an increased complexity of investment decisions. The key thing that investors need to consider is how these decisions might fit in with their overall investment strategy, and importantly, how they fit in with their individual requirements, both financial and emotional.”
Soha Nashaat, CEO of Barclays Wealth, Middle East and North Africa, says: “This report provides an in-depth study into the financial personalities of wealthy investors in the Middle East and gives a fascinating insight into their behavior. When it comes to financial discipline, there is a desire for greater control when compared with other markets. These results present an interesting challenge for the wealth management industry in the Middle East. Clearly, more needs to be done to help clients understand their financial personality and the benefits of using financial self-control strategies.”
