# Transcript

Dimitris

Hello, I am Dimitris Sotiropoulos of the Open University Business School. It’s a great pleasure to have Sharon Collard today with me. She is Professor of Personal Finance Capability in the True Potential Centre for the Public Understanding of Finance, known as PUFin. As described by its name, PUFin is a centre for research working to improve public understanding of personal finance. It also delivers free online modules providing individuals with the tools to make sound financial decisions. Sharon carries with her sixteen years' experience of policy-focused social research on personal finance. We will discuss the design of a new qualitative research project recently launched by PUFin.

But first, I would like to ask Sharon to tell us a little bit about PUFin.

Sharon

Thanks Dimitris. The Centre for the Public Understanding of Finance as we call it PUFin for short was only established in November 2013 so it’s quite a new research centre. And it was established with financial support from True Potential which is a financial services firm and they provide the financial support for us to operate and conduct research. So we are really a pioneering centre of excellence for research and for teaching related to personal finance capability. And the really special thing about PUFin is that it brings together academics with expertise in different fields and those fields include regulation, taxation, consumer attitudes, motivations and behaviours, economics and social marketing. So we bring together a really diverse field of experts to look at personal capability – personal finance capability from a range of perspectives.

There’s three main things that we do in the Centre really. As you say we work to improve public understanding of personal finance and the three ways that we do that are through our research programme. We do it secondly through the delivery of free personal finance modules as you said to help people make sound financial decisions. And the third thing is we really work quite hard to share what we can learn from our research and from our teaching with as wide an audience as possible. And really the aim behind all of this work is that we can make a difference to people’s lives.

Dimitris

That’s great. Now – in a recent PUFin 'green paper' you announced a new research project with the title: 'towards a common understanding of risk'. What is the motivation for this project?

Sharon

The motivation really was that we have very good evidence already that consumers in the UK are generally quite unwilling to take risks with their money when it comes to saving and investing and that’s perhaps not very surprising that they don’t really want to take much risk. But we also know that people have a fairly poor understanding of the nature of financial risks and I think it’s that lack of understanding that we find worrying, because people in the UK and in other countries now have to make some really important financial decisions that will affect their financial future so they need to decide where they are going to invest their pension savings for example and perhaps how they're going to use their pension savings when they come to draw on them later in life. And there are also now in the UK and elsewhere many more opportunities for people to be kind of do-it-yourself investors, in order to choose and to buy investments without taking any professional advice at all. So really with these developments we thought it was a really good time to look at this issue about people’s understanding of risk in a good deal more detail. And also we wanted to look at the subject of risk from the perspective of the financial advice industry and in particular how the industry assesses people’s attitude to risks and the tools that it uses. And the tools that it uses are called risk profiling tools and that might be a term that’s not familiar to people listening and so risk profiling tools really comprise firstly a questionnaire that is administered to a client when they go to see a financial advisor and so the – the financial advisor would give them a questionnaire to complete either at the session or they might go away and complete it at home. And once they’ve completed this questionnaire behind the scenes what happens is there are algorithms so there are mathematical formula that are used to score the client’s answers to the questionnaire and what that does is to calculate a risk profile for the client that the advisor can then use to help select an appropriate saving or investment product or products. So we’re looking at both those things really. It’s both people’s understanding of risk and also how the financial services sector assesses people’s attitude to risk.

Dimitris

With regard to the particular research project I mentioned what are the key questions and how do you plan to investigate them? Will it be a quantitative or qualitative research?

Sharon

So we really wanted to address four key questions in the research. The first one was what do people understand by the – by the term ‘risk’ in relation to saving and investing and what are the things that kind of inform that understanding? How have they come about that the understanding that they have?

The second one is looking at the extent to which risk profiling tools that the financial advice sector uses, how well do they reflect people’s own understanding of risk?

And the third one is really around whether there’s scope to improve risk-profiling tools to provide a better indicator of people’s attitude to risk. So are there some improvements that we could suggest from our research that would make those tools work a bit better?

And the final one really is there anything else that could be complementary to the risk profiling tools that would help people to understand their own attitude to risk and that they could really use themselves to help them make good decisions and get good outcomes.

So in order to answer those research – four – sorry – in order to answer those research questions we have used mainly a qualitative approach to answering them because what qualitative research allows us to do is really get an in-depth understanding of people’s views and experiences through interviews in this case. And what qualitative research is really valuable for is really getting a depth of understanding that you can't get from a survey where there are mainly closed-ended questions. So it’s really about having a fairly open discussion with participants in order to understand in great detail the topic that you're interested in. So it was mainly qualitative research that we’ve done but we also conducted a review of the literature and some other evidence that we – we found in relation to the subjects we were interested in and we also conducted some analysis of the attitude to risk questionnaires that are used actually in the financial advice industry to really understand what sorts of questions are asked and how those questions are constructed and those complemented the qualitative interviews that we did.

Dimitris

So I understand that you conduct interviews. What will the structure of the sample of people that are to be interviewed? Were there any particular selection criteria?

Sharon

We conducted in-depth interviews with three different groups of people for the research. So the first group was a group that we call stakeholders. So these are people who have an interest in the subject, they were representatives from the UK financial regulator, which is called the Financial Conduct Authority, and we also talked to a number of organisations that represent consumers and advocate for consumers who are particularly interested in financial issues that consumers might face. So that was the first group.

The second group was people who were actually working in the financial advice industry. They are mainly financial advisors and these are people then who give advice to clients about investments and other regulated financial products and they use day to day in their jobs these risk profiling questionnaires and tools that I talked about earlier. And we also, within that second group of people in the financial advice industry we also spoke to one or two people who actually work on developing risk profiling tools to get their perspective.

And the third group, the really important group that we spoke to were members of the general public and these were people who had recently taken out or considered taking out an investment because what we really wanted was people who had some recent experience who could talk to us about how they made their decisions to take out that investment.

Dimitris

Did you take the same approach in each of these groups?

Sharon

In terms of actually getting to talk to these people and recruit them into the research we did take a slightly different approach for each of those three groups. With the first group of stakeholders, these are people from the financial regulator and from consumer organisations we mainly identified them from the desk research that we did so the evidence that we’d been reading and the research that we’d been reading, we got names from that. And we contacted people and some of them we already knew because they were in our kind of network of contacts from the research that we've done in the past. And that’s always really useful if you’ve got some contacts or you can ask somebody who is the best person to speak to. That always works really well.

With the stakeholders, what we did we contacted them by email. We told them a bit about the research in the email and we asked them to take part. And then when they agreed to take part we interviewed them by telephone. And we did something fairly similar with the advisors, the financial advice sector that took part in the research. We identified some of them from the – actually from the stakeholders that we interviewed. They suggested some of the people in the advice industry that we might talk to. And also True Potential who are the sponsors of our research centre were really helpful because they have advisors working for them and what they did was provide us with a sample of financial advisors that we could then contact.

And so in that sort of situation it’s really important that you don’t cherry pick people or that True Potential don’t cherry pick the advisors that they wanted us to speak to. So they gave us a list of maybe ten names and email addresses of advisors and we selected the people that we wanted to speak to. We chose maybe four or five of them at random and we talked to them. Again, we contacted them by email in the first instance. We told them what the research was about and then we arranged to interview them by telephone.

Then finally the third group that we spoke to was members of the general public and as I mentioned these were people who had recently taken out or they were considering taking out an investment. And for these people we used a really different – completely different approach to the stakeholders and the financial advisors. And what we did was work with a professional recruitment company to recruit members of the public to the research and in order to make sure that we interviewed the right sorts of people what we do in this sort of situation is draw up quite a detailed recruitment questionnaire that the professional recruiters can go out and use and sometimes they go out and recruit people on the streets or they may recruit people through snowballing so it might be through contacts that they know and it can be through a range of different methods. But the main thing is that the people they recruit meet the criteria that we want.

In order for that to work we also set quotas within the recruitment questionnaire for the types of people that we want to speak to. In this case it was based on the types of investment that they had bought to make sure that we had a good mix of different types of people.

For this research, because financial decisions, if it’s within couple households it might be the couple that makes the decision or it might be one person in the couple that makes the decision. So within the recruitment questionnaire we did ask people who was the main financial decision-maker. If it was the couple together then we interviewed both the man and the woman if they were jointly responsible for those financial decisions. If it was only one person in the couple then we just spoke to them as the main financial decision-maker.

We also recruited respondents from three different locations just to get a spread of experiences from different parts of the UK and we talked to people in London, Northampton and Birmingham.

Unlike the stakeholders and the advice industry interviews we did talk to the consumers face to face in their own homes and we felt that was a better way of interviewing them because really we wanted to ask them in quite a lot of detail about their financial decisions. So they’re quite personal questions in some cases. They're about their finances. They're about making decisions about saving and investing. And sometimes actually from our experience we know that people like to have easy access to paperwork for example if they want to check some things out or they're not sure about things it’s quite comforting to have access to the information that they want at their fingertips. So we went round to people’s homes and interviewed them face to face. And generally across the board the interviews took anywhere between forty-five minutes and perhaps an hour in total.

Dimitris

Thank you for all this thorough description of the process of the sampling. With regard to the questionnaires what’s their structure and what do they aim at capturing?

Sharon

Because these were full in-depth interviews, we would never use a kind of structured questionnaire for this as you would have perhaps in a survey where a survey would have fixed response codes that people answer. You might have a question and then six responses that you want people to fit their answer into. So this is quite different. This is much more open-ended. It’s much more a discussion and a conversation with people. So for qualitative research and for in-depth interviews in particular what we use are topic guides and topic guides or discussion guides as they're sometimes called comprise the sorts of main questions and topics that you want to talk to people about. And in this case, because we had three different groups of people that we were talking to we had one topic guide for each of the three groups and they were all slightly different as you might imagine.

The purpose of a topic guide really, it’s there to make sure that we cover all the main issues so it’s not supposed to be a script. You don’t have to stick to it word for word. And the main job really of the interviewer in using the topic guide is to listen quite carefully to what the respondent is saying and pick up on any cues from the respondent. For example, to ask some follow up questions or to get more details or to get some clarification about what they're saying. So it’s really there to make sure that we as interviewers as gathering as much information as we possibly can but it’s in an open and fairly unstructured way. And so what that gives you is some discretion to ask follow up questions if you think something is particularly interesting but it’s not necessarily on the topic guides then you know you need some discretion to follow that up because it might be relevant to the research. So in order to be a good interviewer you’ve got to know when it’s appropriate to use that discretion and to know in detail what it is you want to get out of the interview because it’s by listening and probing and asking follow up questions that you really do get the most out of – out of qualitative interviewing.

Dimitris

Can you give us some examples?

Sharon

Yes of course. So some examples from the questions that we asked the general public so we started off by asking them a little bit about how would they describe themselves in terms of their general attitude to money? And how would they describe themselves in terms of their attitude to investing money? And these sorts of questions are really to help people relax a little bit and to get them into the topic without asking them anything too personal or too detailed about their personal finances. So we tend to start with things that are kind of non-threatening just to get people into the - into the swing of the discussion.

And because of the nature of this particular research we were really interested in people’s experiences of buying a savings product or investment product. And as I mentioned earlier, they'd all been recruited because they had recently in the past year bought or considered buying a product. So we asked them about that most recent savings or investment product that they'd bought or considered and the sorts of questions we asked them were: was it something that they gave a lot of thought to beforehand? What were the main things that they wanted from the investment? How did they feel about it at the time? And whether they'd used an advisor or a financial services broker at any point in the process.

So those were the sorts of questions that we wanted people to respond to but very often if you say to somebody “tell me about the most recent investment that you bought”, they will cover all of those things without you needing to ask any more questions. So again it’s just knowing what you want to cover and knowing that they’ve given you a full answer.

The other thing that we did in the interviews with consumers was conduct something called cognitive testing. Cognitive testing is kind of testing questions to see how well they work and whether people understand them. And what we did was chose some of the questions that are asked in Attitude to Risk Questionnaires that are used in the financial advise sector and we tested them out on people just to tell us what they thought about them. We used what are called ‘think aloud’ techniques. Basically we asked people to read the question. We asked them to look at the response codes and then we said ‘okay, what does that question mean to you? Do you understand it? Does it make sense to you? Can you answer it?’ And the idea behind this was really to get people to reflect on those questions that are asked by the advice industry and see whether they are actually effective in helping people to understand their attitude to risk.

The other thing that’s probably worth saying is that with the interviews with the general public we weren't entirely sure what to expect and how people would respond to the topic guide. So we used the first three interviews as a pilot really to test the topic guide, and once we’d done those interviews we made some small changes to make it flow a bit better and to include some topics that we thought would help inform our understanding. So that’s often really, really useful to treat the first interviews as a kind of test of your topic guide because sometimes those early interviews throw up some issues that you will want to address before you do any more interviews.

Dimitris

Is this an ongoing research?

Sharon

The research that we’re doing we have just recently finished all of the interviews for our research and now we are moving into the analysis. So the analysis of qualitative data is really important. It’s about looking across the data to understand the themes and the key issues that are coming out of the data and to test any hypothesis that you have. So that’s the stage we are at the moment and we will be publishing the findings later on in this year.

Dimitris

Thank you very much Sharon for this great discussion.

Sharon

Okay. Thanks Dimitris.