New research from the Monash Business School, based on tenyears’ worth of superannuation data, finds that we tend to ‘copy’ theinvestment strategies of our colleagues’ super choices, rather than seek outindividual advice tailored to our own situation.
The researchers used an administrative database provided bythe Mercer (Australia) Super Trust (MST). From here they produced a sample of46 sites which included 28,031 members.
It also finds that when more men are in the office, womenare less active in changing their investment strategy. It’s a finding that mayhave important implications for the ways that superannuation trusteescommunicate and educate their members when it comes to taking charge of theirsuperannuation.
Most Australians are not active with their superannuation.The norm for most of us is to do nothing, rarely assessing any changes to ourinvestment strategy and as a consequence spending most of our career in thedefault investment option.
But if we do, our workplace plays a strong role in ourdecisions – particularly if it is dominated by a single gender.
Dr Carly Moulang from the Department of Accounting hasinvestigated the direct roles that peers play on influencing individuals tochange their investment strategy. She was also interested in understanding moreabout a phenomenon reported by super funds – that a lower propensity of womenmake changes to their super settings.
She explains that peers have been shown to beinfluential to an individual’s financial choices including retirement savings.
"For example, fellow workers who have previously undertakenthe task of researching the investment options and made a change to their investmentstrategy may share their experience and knowledge with other co-workers withintheir workplace," she says.
Individuals may perceive that their peers believe it iseither sensible or unwise not to take control and change investment strategy.
"Observing others and making social comparisons may helpalleviate the uncertainty individuals experience when making complex decisionssuch as those related to superannuation investment choices," Dr Moulang says.
This provides support for identity economics theory, whichasserts the importance of the social context, social categorisation and normsthat feed into our identity for making financial decisions.
It also gives some strong indications to superannuationtrustees how improving financial literacy around retirement and investments inthe workplace could have a stronger flow-on effect than just on an individualbasis.
However, Dr Moulang cautions that observing an associationbetween the likelihood of an individual making an investment strategy changeand the behaviour of her peers does not mean a peer effect is the cause.
"External peer effects may arise in investment activity, forexample as a result of shared preferences among employees of a common employeror common hiring practices within an employer, or the proactivity of some humanresources departments in engaging employees with their retirement savings," shesays.
But the peer impact is more nuanced, particularly aroundgender.
"We found that if there are more men in a workplace, thenthe men in that workplace are more active in making changes to theirsuperannuation investments," Dr Moulang says. She saw the same effect infemale-dominated workplaces.
But it was a different story for mixed-gender workplaces.
"If there are more females in the workplace then they weremore active. However, if there were more men in the workplace then they wereless active," she says.
In male-dominated workplaces, the female minority appear toundergo what is often described as "oppositional reactions" wherepeer information about their male colleagues reduces their likelihood ofengaging actively with their superannuation, she says.
"This may be due to social comparisons being made withtheir male peers. It is also possible that females are excluded from observingthe normative behaviour of their male peers, such as being less likely to beincluded in discussions about investment and savings.
"Resulting complacency could also lead to missedopportunities for these women in terms of positive actions that they could taketowards managing their superannuation."
As women commonly retire with less superannuation than men,this could be an important finding. One of the outtakes from the study is theneed for employers to understand how the gender balance can impact anindividual’s engagement in their superannuation investment strategy, Dr Moulangsuggests.
"If women are in a male-dominated workplace they may needmore assistance and engagement to help them make informed decisions as they arenot necessarily relying on their peers in those situations."
Julie McBeth PH: (03) 9903 1616 or M: 0418 992 485
