2 May 2005

An international expert on investor behaviour has offered a cautionary warning to Australian investors: too much choice can be confusing.

Australia is preparing to usher in a new era of superannuation fund choice, with some 5.7 million working Australians soon to have control over where and how their superannuation is invested.

Steve Utkus, Vanguard's US-based investor behaviour expert and academic, said "Conventional wisdom says more investment options are better for the investor, but conventional wisdom may be wrong. Contrary to popular belief, more choice is not always better. Investors can sometimes be prone to choice overload, and simply fail to act.

"Consumers find an extensive array of products initially appealing and stimulating - yet they also find it more difficult to make a decision when confronted with many choices."

Research in the US using Vanguard recordkeeping data found that on average, participation in US 401(k) plans fell 2% for every 10 investment options added. (Note to editors: 401(k) plans in the US are similar to Australian personal superannuation plans but participation is voluntary).

Mr Utkus is in Australia this week to hold discussions with investors, advisers and the media. His visit is timely, with the Australian government's new superannuation fund choice legislation due to be enacted on 1 July 2005.

Mr Robin Bowerman, Vanguard's Australian head of retail, said: "Steve's work around choice in the US highlights to us the great need for appropriate investor education and financial advice. Our own investor research shows us that clear communication, education and support are primary benefits valued by investors.

" For more information refer Vanguard's Resource Library or:
http://www.vanguard.com.au/library/pdf/CRR_Choice.pdf

Notes for Editors:

About Steve Utkus
Mr Utkus is a visiting scholar at the Wharton School, principal of The Vanguard Group, Inc. and director of Vanguard's Centre for Retirement Research in the United States.

The Centre conducts and sponsors research on retirement savings and retirement benefits in the US. Its work is designed to assist employers, consultants, policymakers and the media in understanding developments in the US retirement system.

The Centre also conducts its own research on individual savings and investment behaviour, and collaborates with leading academic and industry researchers on topics of mutual interest.