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Financial terminology such as ‘stockbroker’, ‘pension’ and ‘FTSE’ causes a stress reaction in humans, a new scientific study from Barclays has found.

The first-of-its-kind experiment, led by i2 media research at Goldsmiths University of London, combined psychometric tests with a bespoke adaptation of the Emotional Stroop Test. The test assessed people’s emotional association with words by presenting participants with 100 colour-word combinations and comparing the response times and error rates of both neutral and financial terms.

Overseeing the experiment, Jonny Freeman, Managing Director of i2 media research and Professor of Psychology at Goldsmiths University of London, said: “Our experiment looked at participants’ behavioural responses to certain words, from which we could infer their emotional responses. Two thirds of participants’ responses indicated increased anxiety when faced with financial lingo – with investment terms such as ‘stockbroker’, ‘asset manager’ and ‘investment risk’ causing the strongest reactions. Findings were supported by participants’ self-reported physiological reactions.”

Feeling the pressure

And the effects don’t seem to stop with emotions, as almost a fifth (17 per cent) of participants reported that they broke out in a sweat in response to the experiment, whilst 44 per cent reported an increased heart rate and over a fifth (23 per cent) reported experiencing muscle twitches.

Investing as scary as sky-diving

The results of the experiment were backed up by further research from Barclays into people’s perceptions of investing. The supporting research revealed that almost three-quarters of Brits did not feel confident enough to invest their cash on the stock market, with a quarter (25 per cent) feeling as worried by the thought of investing as skydiving.

In fact, investing in the stock market was revealed as one of the most difficult skills to learn, with Brits thinking it was harder than mastering computer coding (44 per cent), ballroom dancing (29 per cent), running a marathon (24 per cent) and changing a car tyre (19 per cent).

When probed further on why such a fear existed, 86 per cent of Brits claimed they were baffled by financial and investment jargon. One in ten mistook a ‘blue-chip stock’ for a poker move and almost a third believed a ‘bull market’ – a market in which share prices are rising – was a place in Birmingham.

Dr Pete Brooks, Head of Behavioural Finance at Barclays Smart Investor, said: “We naturally struggle to do things which make us feel uncomfortable, even if doing it would be in our best interests. These results are fascinating because they suggest that it isn’t just a lack of understanding which is the barrier to investing. There appears to be a much more sub-conscious reaction to the language of investing, which education alone will find difficult to break down.”

The gender and generational gap

Men in the study were found to experience stronger adverse reactions than women, taking an average of 4 per cent longer to process investment terms.

Despite this, the supporting research found that it’s women who have the least confidence when it comes to their finances, with 34 per cent feeling they have no understanding of finance and investments compared to just 19 per cent of men.

And the differences may not stop at gender, as surprisingly the younger cohort of participants (aged 18 – 26) showed the faster response times in the experiment when compared to their older peers (27+). This suggests that younger people had a reduced stress reaction and are therefore less fear-struck by financial and investment lingo.

Reacting to the experiment results, Ross Dalzell, Head of Barclays Smart Investor said:

“This fear of investing could have a real impact on people’s future financial health as, whilst you could lose money, investing offers the potential of higher returns than traditional cash savings over the longer term. Our experiment has proved once again how the language we use has real impact on people’s confidence in investing. It’s clear that the industry needs to rethink the way we talk about investing and, off the back of this experiment, we’ve committed to a review of our platform to simplify the language that we use and start to break down some of the known barriers”.

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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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