Digital customization of consumer investments in multiple funds: virtual integration improves risk–return decisions

Sesil Lim, Bas Donkers, Patrick van Dijl, Benedict G.C. Dellaert

Research output: Contribution to journalArticleResearchpeer-review

1 Citation (Scopus)

Abstract

Digital technology in financial services is helping consumers gain wider access to investment funds, acquire these funds at lower costs, and customize their own investments. However, direct digital access also creates new challenges because consumers may make suboptimal investment decisions. We address the challenge that consumers often face complex investment decisions involving multiple funds. Normative optimal asset allocation theory prescribes that investors should simultaneously optimize risk–returns over their entire portfolio. We propose two behavioral effects (mental separation and correlation neglect) that prevent consumers from doing so and a new choice architecture of virtually integrating investment funds that can help overcome these effects. Results from three experiments, using general population samples, provide support for the predicted behavioral effects and the beneficial impact of virtual integration. We find that consumers’ behavioral biases are not overcome by financial literacy, which further underlines the marketing relevance of this research.

Original languageEnglish
Pages (from-to)723-742
Number of pages20
JournalJournal of the Academy of Marketing Science
Volume49
DOIs
Publication statusPublished - 2021

Keywords

  • Consumer decision making
  • Customization
  • Digital marketing
  • Financial services
  • Online decision tools
  • Risk-return decisions

Cite this