01/10/2020: 15.15 – 15.45
We always hear that Belgium has a low investment vs. saving ratio. But this is only partially confirmed by key figures of BNB and EuroStats. Nearly 60% of Belgian households invest in financial assets. This is significantly higher than the European average; still, over 280 billion remains on saving accounts.
The most important reasons are emotional. Belgians think:
- They don’t have enough money to invest;
- They are afraid to lose money;
- They don’t understand;
- And finally, they don’t understand the personal benefits of investing.
(Source: survey AG)
Life insurance and its specifics options are certainly an answer to make investment attractive again – like drip feed (investing amounts at different times without having to make recurring payments), stop-loss insurance, or a personal patrimonial construction.
The mindset can be changed by illustrating that, historically, crises are shorter than periods of increase, and that declines are smaller than increases (source AG). But also, to show that diversification pays off, and that investments must be seen from a portfolio perspective. Part of the solution is education. We need to break people’s perceptions, which overestimate the probability of negative returns and the magnitude of losses (Kandar_2017 survey). To do so, drip feed is an asset, as it is not about timing the markets, but rather about time in the markets. And the figures show that the amounts invested through drip feed are higher than once-off investments. As a result, they finally have enough money to invest.
Fear of losing money can also be managed through different options, like a dynamic stop-loss. It is a response to the fact that in investment, the risks are mainly short term, while the performance is in the long term. The stop-loss cuts the unpredictable market volatility and allows for a gradual return to the markets. This protection against major drops generates confidence, the confidence needed to invest.
The multiple constructions possible within a contract also allow for a personal approach to projects, to give meaning to the investment, while offering control to the investor. The processes are standardised, but the response to the client must be personalised.
Ultimately, insurance helps to recreate a behavioural investment and to build empathy. This way, we add what has been missing so far: positive emotion and tangibility. We create added value, as well as conviction. As a result, investment becomes than a feeling of wellbeing, something that is not really the case today. And, insurers are a main driver of this success!
About the speaker
Xavier Gerard has 25 years 25 years of experience within the financial industry (ING & AG) in different roles, as Business Development, Product Management Invest & Insurance, Sales and Training.
He is the founder and managing director of first ETF’s portfolio fund in Belgium for retail clients.
He is licensed in social psychology and a graduate from the ‘Executive Program on Asset Management’ of Vlerick business school.