Financial Communications and Asset Allocation Decisions: The Effects of Reading Style, Financial Knowledge, and Individual Differences

June 2017

Financial communications can be complex, making misinterpretation likely. This study takes an in-depth look at how people process – and act upon – financial information.

Summary

Although financial consultants are available to workers in many large organizations, important retirement plan decisions are often based solely on plan communications and the worker’s individual knowledge. Yet, most people find financial information complex and unfamiliar. This study assesses working adults’ ability to comprehend communications about retirement savings plans, and projects how comprehension levels, along with other factors, affect personal asset mix decisions.

Key Insights
Communication media and format have large effects on reading style, which can affect comprehension.
Print encourages a more systematic, deeper reading style compared to an online format. Charts attract visual attention.
Comprehension and individual differences (especially risk tolerance and financial self-confidence) have large effects on asset mix decisions.
Methodology

The researchers used eye-tracking technologies and procedures to collect detailed, individual-level data on how working adults process communications about retirement savings plans. As part of the study, they manipulated the medium of communication (print vs. online) and information format (graphical vs. text) to assess how these factors affect reading style, comprehension (i.e., increases in financial knowledge), and personal asset mix decisions.

Reading style can affect comprehension, which in turn affects personal asset allocation decisions.
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Authors

About TIAA Institute

The TIAA Institute helps advance the ways individuals and institutions plan for financial security and organizational effectiveness. The Institute conducts in depth research, provides access to a network of thought leaders, and enables those it serves to anticipate trends, plan future strategies and maximize opportunities for success.
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