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NTUSTIM6515701
AHP Case Study 2
Identifying key factors affecting consumers' choice of wealth management services: An
AHP approach
NTUSTIM6515701 Outline
1.Introduction2.Literature review3.Data collection and
methodology4.Results5.Conclusion and
discussion
NTUSTIM6515701 Introduction
•Wealth management (WM) is a professional service which is the combination of financial / investment advice, accounting / tax services, and legal / estate planning for one fee.
•This study may lead to a better understanding on the following questions: Do the priority weights of the high-net-worth customers present a different pattern? What should the WM service providers focus on when they try to meet the needs of their target-clients?
NTUSTIM6515701 Introduction
•We surveyed the relative importance of factors, including the image, the products, and the quality of service, by directing a questionnaire to consumers who are using or planning to use WM services.
NTUSTIM6515701
1.Wealth management2.The Analytical Hierarchy
Process (AHP)
Literature review
NTUSTIM6515701 Data collection and methodology
•Using convenience sampling, there were 209 usable questionnaires. Researchers waited for the subjects to complete the questionnaires. Thus, the response rate (69.67 percent) is relatively high.
NTUSTIM6515701 Data collection and methodology
•The following table displays the sample distribution.
n %Sex Male 81 38.76
Female 128 61.24 Age 20 – 30 42 20.10
30 – 40 57 27.27 40 – 50 73 34.93 50 – 60 35 16.75 60 + 2 0.96
Education High Scholl or under 46 22.01 College / University 147 70.33 or above 16 7.66
Financial Background With Financial Background 103 49.28 Without Financial Background
106 50.72
Net Assets (NT$)1 < 89 42.58 (Assets - Debts) 1 – 77 36.84
+ 43 20.57Annual Income (NT$) < 150 71.77
+ 59 28.23
NTUSTIM6515701 Methodology
•We adopt AHP method for ranking the factors affecting consumers’ choice of WM services. The AHP method used in this study is a three-step process. 1. the decision problem is decomposed
into a hierarchy map of interrelated criteria.
2. the input data related to each criterion is generated by pair-wise comparisons of the criteria based on a nine-point weighting scale. The nine-point scale has been the standard rating system used for AHP.
NTUSTIM6515701 Methodology
3. the weight of each criterion in each level of the hierarchy is computed using the eigenvalue method
Figure 1. The hierarchical structure of the decision making problem
Selection of WM Service Providers
ProductsImage Quality of Service
Sub-Criteria
Sub-Criteria
Sub-Criteria
Sub-Criteria
Level 2
Level 3
NTUSTIM6515701 Methodology
Criteria and sub-criteria
NTUSTIM6515701 Methodology
•Considering that the investor attributes may influence the priorities of the criteria, the subjects’ investor attributes are classified by four dimensions: the risk bearing, the returns taking, the product-familiarity, and the investing habit, which are established by 13 questions using a 5-point Likert scale.
NTUSTIM6515701 Methodology
•Factor analysis is adopted as an exploratory tool to classify respondents into groups with similar investing characteristics and habits. Exploratory factor analysis is commonly used to uncover the underlying structure of a relatively large set of variables.
NTUSTIM6515701 Results─ Investment characteristics
•In the basic investment characteristics section of the questionnaire, the respondents were asked to rank their first three financial information sources.
NTUSTIM6515701 Results─ Investment characteristics
•Panel A reveals that the two main sources for financial information are print media (47 respondents) and financial institutions (35 respondents), followed by the Internet, TV, and radio. Only 9 respondents rank relatives or friends as their main financial information resource. The respondents also rank the top three financial instruments in their assets allocation.
NTUSTIM6515701 Results─ Investment characteristics
NTUSTIM6515701 Results─ Investment characteristics
•Mutual funds (42 respondents) and stocks (40 respondents) appears most frequently among the respondents’ top three choice for asset allocation, followed by deposits (35 respondents) and insurance (34 respondents). Only few respondents allocate most of their assets to bonds, gold, foreign exchange, and trust.
NTUSTIM6515701 Results─ Investment characteristics
NTUSTIM6515701 Results─ Investment characteristics
•Panel C to E present the investment characteristics of the full sample, of the respondents with financial background, and respondents without financial background.
NTUSTIM6515701 Results─ Investment characteristics
•The distribution of the proportion of expenditure is exhibited in Panel D. Living costs take up the largest proportion of the expenditure, followed by investment spending, education loans, and travel. The ranking of the proportion of expenditure is similar for respondents with and without financial background.
•Panel E shows the distribution of the investor attributes.
NTUSTIM6515701 Results─ Investment characteristics
NTUSTIM6515701
Results─ Priority weights in the AHP decision trees
•In investigating the factors which could affect the consumers' choice of WM services, this study considered: image, products and quality of service.
•we find that “quality of service” is the most influencing factors in the selection of WM service provider. Among the four sub-criteria related to “quality of service”, “confidentiality” is the most important consideration, followed by attitude, convenience, and communication, in the order of their weights.
NTUSTIM6515701
Results─ Priority weights in the AHP decision trees
•In addition to using the full sample to compute the weights of factors influencing the choice of WM services, subsamples characterized by several investor characteristics – gender, financial background, net assets, annual income, and investor attributes – which might affect the weights are also used to analyse the data in more detail.
NTUSTIM6515701
Results─ Priority weights in the AHP decision trees
•he results indicate that the ranking of the criteria is not affected by gender or whether the respondents have financial background or not.
•Difference can only be found in a few sub-criteria under “quality of service” and “image”.
NTUSTIM6515701
Results─ Priority weights in the AHP decision trees
•The last three columns show the priority weights by investor attributes – active, moderate, and conservative investors. As expected, active investors consider “products” as the most significant criterion and emphasize on “returns” of “products”. Moderate and conservative investors show similar preference: considering “quality of service” the most important factor.
NTUSTIM6515701
Results─ Priority weights in the AHP decision trees
•The result shown in next page’s table indicates that special attention should be paid to “products” if high net worth customers are the target of the WM service provider. “Risk” factor is especially important to these customers. “Popularity” and “recommendation” seem to be the least important factors in their decision process.
NTUSTIM6515701
Results─ Priority weights in the AHP decision trees
Panel A: Weight between the criteria / Weight within the criteria
CriteriaFull
SampleMale Female
With Financial
Background
Without Financial
Background
Net Assets
<
Net Assets
1
Net Asserts
+
Annual Income
<
Annual Income
+Active
Moderate
Conservative
Image 0.208 0.206 0.210 0.187 0.232 0.209 0.188 0.245 0.203 0.219 0.205 0.194 0.218
Recommendation
0.083 0.099 0.083 0.079 0.100 0.076 0.094 0.109 0.086 0.098 0.095 0.089 0.083
Professional 0.255 0.253 0.255 0.253 0.256 0.243 0.253 0.278 0.243 0.283 0.266 0.244 0.251
Morality 0.283 0.289 0.283 0.292 0.278 0.308 0.270 0.270 0.297 0.257 0.260 0.296 0.305
Reliability 0.266 0.240 0.266 0.265 0.246 0.258 0.260 0.242 0.250 0.266 0.260 0.247 0.254
Popularity 0.113 0.119 0.113 0.111 0.120 0.116 0.122 0.101 0.124 0.096 0.119 0.125 0.107
Products 0.386 0.394 0.381 0.390 0.380 0.337 0.439 0.391 0.361 0.449 0.425 0.369 0.357
Risk 0.333 0.360 0.316 0.356 0.309 0.341 0.313 0.361 0.318 0.372 0.292 0.353 0.362
Returns 0.296 0.278 0.308 0.309 0.281 0.280 0.318 0.281 0.284 0.322 0.351 0.280 0.255
Fees 0.157 0.154 0.159 0.137 0.180 0.168 0.151 0.148 0.164 0.138 0.158 0.173 0.148
Diversification 0.214 0.208 0.217 0.198 0.229 0.211 0.218 0.210 0.233 0.169 0.199 0.196 0.236
Quality of Service 0.406 0.400 0.409 0.423 0.388 0.454 0.373 0.365 0.436 0.332 0.370 0.436 0.425
Attitude 0.234 0.259 0.218 0.233 0.234 0.240 0.219 0.242 0.235 0.229 0.269 0.194 0.221
Communication 0.203 0.181 0.218 0.225 0.183 0.188 0.235 0.183 0.205 0.197 0.213 0.190 0.198
Confidentiality 0.331 0.314 0.341 0.329 0.330 0.337 0.325 0.326 0.331 0.331 0.293 0.317 0.374
Convenience 0.232 0.246 0.223 0.213 0.253 0.236 0.221 0.248 0.228 0.243 0.225 0.299 0.207
NTUSTIM6515701
Results─ Priority weights in the AHP decision trees
Panel B: Ranking between the criteria / Ranking within the criteria
CriteriaFull
SampleMale
Female
With Financial
Background
Without Financial
Background
Net Assets
<
Net Assets
1
Net Asserts
+
Annual Income
<
Annual Income
+
Active
Moderate
Conservative
Image 3 3 3 3 3 3 3 3 3 3 3 3 3
Recommendation
5 5 5 5 5 5 5 4 5 4 5 5 5
Professional 3 2 3 3 2 3 3 1 3 1 1 3 3
Morality 1 1 1 1 1 1 1 2 1 3 2 1 1
Reliability 2 3 2 2 3 2 2 3 2 2 2 2 2
Popularity 4 4 4 4 4 4 4 5 4 5 4 4 4
Products 2 2 2 2 2 2 1 1 2 1 1 2 2
Risk 1 1 1 1 1 1 2 1 1 1 2 1 1
Returns 2 2 2 2 2 2 1 2 2 2 1 2 2
Fees 4 4 4 4 4 4 4 4 4 4 4 4 4
Diversification 3 3 3 3 3 3 3 3 3 3 3 3 3
Quality of Service 1 1 1 1 1 1 2 2 1 2 2 1 1
Attitude 2 2 3 2 4 2 4 3 2 3 2 3 2
Communication 4 4 3 3 3 1 2 4 4 4 4 4 4
Confidentiality 1 1 1 1 1 4 1 1 1 1 1 1 1
Convenience 3 3 2 4 2 3 3 2 3 2 3 2 3
NTUSTIM6515701 Conclusion and discussion
•This research makes an important first step toward understanding the consumers’ decision process and influencing factors in the selection of WM services.
NTUSTIM6515701 Conclusion and discussion
•Care must be taken in interpreting or generalizing the findings. First, the convenient sample used in this study may not be representative of the entire population.
•Although special attention had been paid to consider the possible influence of various consumer attributes, a larger and more representative sample may be needed to confirm and generalize the results before they can be applied in practice.
NTUSTIM6515701 Conclusion and discussion
•Second, other factors such as culture difference may limit the applicability of the results in other countries. Failure to consider cultural differences between countries has been the cause of many business failures.
•In this regard, further studies are necessary to determine the generalizability of the findings to other cultures.
NTUSTIM6515701 Conclusion and discussion
•Future research may extend the current study by including more countries in the analysis. The results obtained with consumers in Taiwan might guide other similar research conducted in emerging markets, especially in China and neighbouring Asian countries.
NTUSTIM6515701
Thanks for your attention!