Talk June 5th in Maastricht at 4th Maastricht Behavioral Economic Policy Symposium (M-BEPS): Behavioral insights and experiments at the Dutch financial regulator AFM

1. 4th Maastricht Behavioral Economic Policy Symposium (M-BEPS)
Behavioral insights and experiments at the Dutch financial regulator AFM - Wilte Zijlstra1
Behavioral insights and experiments
at the Dutch financial regulator AFM
Wilte Zijlstra
Expertise Centre, team Consumer Behavior
Dutch Authority for the Financial Markets (AFM)
Wilte.Zijlstra@afm.nl
Twitter: @wilte
5 June 2018

2. Behavioral insights and experiments at the Dutch financial regulator AFM - Wilte Zijlstra2
* Dutch financial regulator AFM
* Behavioral insights
* Experiments
Wilte Zijlstra
Expertise Centre, team Consumer Behavior
Dutch Authority for the Financial Markets (AFM)
Wilte.Zijlstra@afm.nl
Twitter: @wilte
5 June 2018

3. 5 June 2018Behavioral insights and experiments at the Dutch financial regulator AFM - Wilte Zijlstra3
Level playing field

4. 5 June 2018Behavioral insights and experiments at the Dutch financial regulator AFM - Wilte Zijlstra
Mission
The AFM is committed to
promoting fair and transparent
financial markets.
As an independent market
conduct authority, we contribute
to a sustainable financial
system and prosperity in the
Netherlands.
4

5. 5 June 2018Behavioral insights and experiments at the Dutch financial regulator AFM - Wilte Zijlstra5
Twin peaks
InsuranersBanks
DNB
AFM
Financial
Advisors
Stock MarketPension-
funds
Gedragstoezicht;
Conduct and information provision
of market participants
Prudential supervision;
solidity financial institutions &
stability system

6. AFM: focus on effect
Malcolm Sparrow
• Pick important problems
• Fix them
• Tell about it
5 June 2018Behavioral insights and experiments at the Dutch financial regulator AFM - Wilte Zijlstra6

7. Pick the right tool (intervention)
5 June 2018Behavioral insights and experiments at the Dutch financial regulator AFM - Wilte Zijlstra7

8. Gneezy & Rustichini:
A fine is a price – Israëli day care
5 June 2018Behavioral insights and experiments at the Dutch financial regulator AFM - Wilte Zijlstra8
Gneezy, Uri, and Aldo Rustichini. "A fine is a price." The Journal of Legal Studies 29.1 (2000): 1-17.
Start fines End fines

9. Effective regulation through
behavioral insights
Psychology as part of supervision
5 June 2018Behavioral insights and experiments at the Dutch financial regulator AFM - Wilte Zijlstra9
 Consumer Behavior Expert Team in Center
of Expertise [www.afm.nl/cg]
 By applying behavioral insights, we aim to
increase the effectiveness and efficiency
of our supervision, and improve financial
choice architecture for consumers
• Counter evil nudges
• Positive guidance for important financial decisions

10. • Realistic perspective on human behavior
• Potentially successful interventions
• Measure effect
5 June 2018Behavioral insights and experiments at the Dutch financial regulator AFM - Wilte Zijlstra10

11. • Realistic perspective on human behavior
• Potentially successful interventions
• Measure effect
5 June 2018Behavioral insights and experiments at the Dutch financial regulator AFM - Wilte Zijlstra11

12. People’s behavior not always rational
5 June 2018Behavioral insights and experiments at the Dutch financial regulator AFM - Wilte Zijlstra12

13. 5 June 2018Behavioral insights and experiments at the Dutch financial regulator AFM - Wilte Zijlstra13
Behavior often Predictably Irrational
Consumers
deviate from
ideal decision making process
because of
biases and
heuristics (rules-of-thumb)

14. Perspectives on human behavior
5 June 2018Behavioral insights and experiments at the Dutch financial regulator AFM - Wilte Zijlstra14
I am fully rational and
always make well-informed choices
I am irrational and
only do foolish things

15. Realistic perspective
on human behavior
5 June 2018Behavioral insights and experiments at the Dutch financial regulator AFM - Wilte Zijlstra15
My rationality is bounded
My preferences are not stable
My time and motivation are finite
This sometimes leads to problems
when I have to make decisions
http://www.afm.nl/nl/nieuws/2013/feb/eiopa-rapport-pensioncommunicatie.aspx
Max

16. • Realistic perspective on human behavior
• Potentially successful interventions
• Measure effect
5 June 2018Behavioral insights and experiments at the Dutch financial regulator AFM - Wilte Zijlstra16

17. EAST: Four Simple Ways to Apply
Behavioural Insights (2014)
5 June 2018Behavioral insights and experiments at the Dutch financial regulator AFM - Wilte Zijlstra17
http://www.behaviouralinsights.co.uk/publications/east-four-simple-ways-to-apply-behavioural-insights/

18. Nudge (2008)
5 June 2018Behavioral insights and experiments at the Dutch financial regulator AFM - Wilte Zijlstra18
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2499658
Choice architecture
Libertarian paternalism

19. Cialdini –
Influence (2007)
5 June 2018Behavioral insights and experiments at the Dutch financial regulator AFM - Wilte Zijlstra19
https://www.youtube.com/watch?v=cFdCzN7RYbw

20. Where to
intervene?
5 June 2018Behavioral insights and experiments at the Dutch financial regulator AFM - Wilte Zijlstra20
Product Distribution
Information
Fair
Financial
Markets
De Cloe&Cox (2017) Gedragseconomische aspecten bij de ontwikkeling, informatieverstrekking en distributie van financiële producten

21. • Realistic perspective on human behavior
• Potentially successful interventions
• Measure effect
5 June 2018Behavioral insights and experiments at the Dutch financial regulator AFM - Wilte Zijlstra21

22. Online consumer surveys
AFM Consumer Monitor
Since 2004
AFMconsumentenpanel.nl
Since 2014
5 June 2018Behavioral insights and experiments at the Dutch financial regulator AFM - Wilte Zijlstra22
https://www.afm.nl/nl-nl/professionals/onderwerpen/consumentengedrag-consumentenonderzoek
& other incidental research

23. Intention ≠ behavior
5 June 2018Behavioral insights and experiments at the Dutch financial regulator AFM - Wilte Zijlstra
Choi J, Laibson D, Madrian B, Metrick A. (2006) Saving for Retirement on the Path of Least Resistance. In: McCaffrey E, Slemrod J
Behavioral Public Finance: Toward a New Agenda. New York: Russell Sage Foundation; 2006 p. 304-351
≠
23

24. Watch out!
Borrowing money costs money
5 June 2018Behavioral insights and experiments at the Dutch financial regulator AFM - Wilte Zijlstra24

25. 5 June 2018Behavioral insights and experiments at the Dutch financial regulator AFM - Wilte Zijlstra25
5.70
5.69
aantal pagina's
Geen kredietwaarschuwing
2.8%
2.6%
%aanvraag
Geen kredietwaarschuwing
Bezoekers
website
random
verdeeld
N=5990
N=5897
95% betrouwbaarheidsinterval
N=226
N=217
€ 9,630
€ 8,803
kredietbedrag
38.7%
38.5%
%acceptatie

26. Does the credit warning work?
Our RCT found no evidence for an effect on:
• Number of pages people visit
• How many website visitors apply for a loan
• How many applications are accepted
• Requested loan amount
5 June 2018Behavioral insights and experiments at the Dutch financial regulator AFM - Wilte Zijlstra26

27. 5 June 2018Behavioral insights and experiments at the Dutch financial regulator AFM - Wilte Zijlstra27
https://www.afm.nl/nl-nl/professionals/nieuws/2009/dec/kredietwaarschuwingszin-succes
2009: “success”
2016: “no immediate effect”
https://www.afm.nl/nl-nl/professionals/nieuws/2016/dec/geld-lenen-geen-effect

28. Primary market for retail offerings
5 June 2018Behavioral insights and experiments at the Dutch financial regulator AFM - Wilte Zijlstra28
Prospectus Exempt Non-exempt offerings
• Amount of capital available (retail investors in primary market): est. 18 – 30 billion euro
(AFM, 2015)
• Amount of retail-offerings (yearly): est. 500 million euro.
• Reference to availability of
prospectus (non-prescribed)
• Approval of prospectus by AFM
• Advertisements regulated by 5:20
Wft.
•No filing requirements etc.
•Advertisement (potentially)
regulated by 4:19 Wft.
•Mandatory warning:

29. Mock advertisements
with warning & without warning
5 June 2018Behavioral insights and experiments at the Dutch financial regulator AFM - Wilte Zijlstra29

30. Low intention to buy…
5 June 2018Behavioral insights and experiments at the Dutch financial regulator AFM - Wilte Zijlstra30

31. …Intention to buy a little higher
without warning…
5 June 2018Behavioral insights and experiments at the Dutch financial regulator AFM - Wilte Zijlstra31

32. Warning mainly works on int to buy
for people who didn’t know warning
5 June 2018Behavioral insights and experiments at the Dutch financial regulator AFM - Wilte Zijlstra32

33. How Does Disclosure in Advertisements
Affect Investor Behavior?
5 June 2018Behavioral insights and experiments at the Dutch financial regulator AFM - Wilte Zijlstra33
https://www.law.ox.ac.uk/business-law-blog/blog/2016/09/how-does-disclosure-advertisements-affect-investor-behavior

34. Prefill
Income
& expenditures
5 June 2018Behavioral insights and experiments at the Dutch financial regulator AFM - Wilte Zijlstra34
https://www.afm.nl/nl-nl/professionals/nieuws/2018/mrt/vooraf-
ingevulde-bedragen-kredietwaardigheidstoets
N=1204
N=1342
Jun 15 – Jul 17, 2017

35. Read more: AFM and the
application of behavioural insights
www.afm.nl/cg >>
Publicaties &
scroll down
5 June 2018Behavioral insights and experiments at the Dutch financial regulator AFM - Wilte Zijlstra35