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Understanding Household Economic Behavior in a Low Expected Returns Environment

Explore the impact of persistent low expected returns on household savings and investment decisions, highlighting the need for risk management and alternative investment strategies.

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Understanding Household Economic Behavior in a Low Expected Returns Environment

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  1. “How will Persistent Low Expected Returns Shape Household Economic Behavior” • A ReGULATOR AND savers’ perspective Financial Risks International Forum 2019 “Low Interest Rate Environment: Search for Yield, Risk Management and Transitions” Paris, 18 & 19 March 2019

  2. WHY SAVE ? • 1 ILB RISK FORUM MARCH 19th 2019

  3. WHY SAVE ? WHY INVEST ? Lowinterestrates • 10 years french government bonds : 0,42 % • 30 years french government bonds : 1,47 % Financial assets : lowperceivedperformance Investingin financialmarkets : high perceivedrisk ILB RISK FORUM MARCH 19th 2019

  4. WHY SAVE ? WHY INVEST ? REFERENCE POINTS • AMF Economists’ findings • between 1987-2017 • - for a one off-investment at the start of the period • over a 10 year horizon, • the average real annualised return • (net of inflation, charges and taxes) • 3,3% on bonds • 2,7% on equities • 1,3% on Livret A Lowperceived performance of financialassets ILB RISK FORUM MARCH 19th 2019

  5. WHY SAVE ? WHY INVEST ? REFERENCE POINTS AMF Economits’ findings Risk and performance 1987- 2017 Despite of - Historicallyfavourablecircumstances for bonds - Spells of volatility for equities Equities have deliveredbroadly comparable returns to those of bonds For a mixed portfolio invested in bothequities and bonds, thereis a benefit of an annualregularrebalancing With a long term horizon High perceivedrisk in investing in financialmarkets ILB RISK FORUM MARCH 19th 2019

  6. WHAT ARE • SAVERS ’ NEEDS ? • The AMF SavingAND INVESTMENT BAROMETER • 2 ILB RISK FORUM MARCH 19th 2019

  7. WHAT SAVERS’ NEEDS, WhereARE THEIR CONCERNS ? ANTICIPATING NEEDS for AGING UNFORESEEN EXPENSES PREPARING for RETIREMENT 69 % in 2017 Stable/2017 Stable / 2017 83% 72% 76% A NEST EGG FOR NOW AND FOR THE FUTURE ILB RISK FORUM MARCH 19th 2019

  8. INVESTMENT : SELECTION CRITERIA RISK EXPECTED RETURN ILB RISK FORUM MARCH 19th 2019

  9. EXPECTED RETURN/ NET PERFORMANCE ? NET PERFORMANCE Inflation Tax Social charges and Taxes Costs & charges 1,6% ILB RISK FORUM MARCH 19th 2019

  10. CONCERNS FOR THE FUTURE AND INVESTMENT HORIZON • HOW TO INVEST FOR A LONG TERM HORIZON WHEN • IS THE AVERAGE MAXIMAL DURATION OF INVESTMENTS ? 4,9 YEARS ILB RISK FORUM MARCH 19th 2019

  11. HOW TO INVEST ? • A lowlevel of risk • A relative high expected performance • Not long terminvestmentoriented • … ILB RISK FORUM MARCH 19th 2019

  12. PSYCHOLOGICAL AND BEHAVIORAL BRAKES • AND LEVERS • 3 ILB RISK FORUM MARCH 19th 2019

  13. BRAKES : MISCONCEPTIONS ABOUT EQUITIES • Equities are not spontaneously seen as suitable for long-term savings. • Savings in shares are seen as risky or even unprofitable • Shares are not seen as easily accessible and affordable assets. A qualitative survey AMF - KANTAR-TNS ILB RISK FORUM MARCH 19th 2019

  14. LEVERS FOR LONG TERM INVESTMENTS (1) THE AMF SAVING AND INVESTMENT BAROMETER RESULTS 16% Younger (35 ans +) Financial assets : 30- 100 KE 24% Male CSP + Financial assets: 50-150 Self confidence AND Trust in the future ILB RISK FORUM MARCH 19th 2019

  15. LEVERS FOR LONG TERM INVESTMENT (2) TO UNABLETO INVEST IN EQUITIES FOR THE FIRST TIME • Younger people are more comfortablewithrisk Younger people mention « ethics» more often SUSTAINABLE FINANCE TO FINANCE THE ENERGY TRANSITION and Financial Education March 25-29th 2019 Oct 2019 ILB RISK FORUM MARCH 19th 2019

  16. INVESTMENT SCAMS VIGILANCE • 5 ILB RISK FORUM MARCH 19th 2019

  17. SCAMS ON INTERNET ILB RISK FORUM MARCH 19th 2019

  18. Whatis a saver’s perception of risk ? A STORY OF Paradox 2018 2019 ILB RISK FORUM MARCH 19th 2019

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