How misleading certainty affects consumer trust and confidence

by Eleonore Batteux, Avri Bilovich, Samuel Johnson and David Tuckett
Posted on October 13, 2020

When making financial decisions, customers like certainty. No doubt it gives them confidence – but what they also need is trust in financial providers. However, how do consumers react when these providers take advantage of the fact that consumers crave certainty to market their products? What happens when the alleged certainty reveals itself as nothing more than a misleading promise? In our TFI research project, we aim to answer these questions.

Our results show that consumers have a bias towards precise forecasts when making investment decisions, despite them being too precise given the uncertainty present in financial markets.1 This can make them more confident in their investment and in the forecaster. How long does this confidence last? Does it break down once consumers realise these forecasts were deceptive?

Two two-wave experiments

We conducted two online experiments (N=820) between July and September 2020 with consumers from the general UK population, mostly with little to no investment experience, recruited via Prolific. Each experiment was split into two waves, with a one-week delay in between. This allowed us to capture the reality of decisions that unfold over time, leaving participants time to process - but also perhaps forget - their previous decisions and experiences.

Each wave simulated two investment years, in which consumers received a certain or an uncertain forecast for the year ahead from their investment management firm. The certain forecast made confident and precise predictions, whereas the uncertain forecast acknowledged uncertainties and gave vaguer predictions. Consumers then witnessed their investment’s monthly growth, which in both cases ended up much lower than the forecasted growth (although still positive).

Testing trust, confidence and certainty

In the first experiment, consumers reported being less happy, more surprised and more annoyed following certain rather than uncertain forecasts when they turned out to be incorrect, despite being more favourable to certain forecasts to begin with. Crucially, consumers were less likely to trust their investment management firm after an incorrect certain forecast. This was partly because the certain forecast was perceived as less reliable, but more so because the firm was perceived as more intentionally misleading. This in turn made consumers more likely to change investment firms. They continued to be disappointed about certain forecasts in the same way throughout the experiment, which suggests they didn’t learn to become more suspicious of overly confident and precise forecasts

“If the forecast is wrong, consumers lose confidence in the forecaster but not necessarily in the object of the forecast”

In the second experiment, we tested how willing consumers were to sustain their investment after receiving incorrect certain or uncertain forecasts. This time they did not have the option to switch firms. Although consumers reported fairly low confidence in their investment and leaned towards pulling out, the certainty of the forecast did not influence this. This shows that consumers dissociate between the forecaster and their investment: if the forecast is wrong, they lose confidence in the forecaster but not necessarily in the object of the forecast. Interestingly, this time consumers did report being less excited and more worried about certain forecasts over time. This suggests they learn to become suspicious of them when the source of the forecast remains the same.

Good news for consumers (but less favourable for investments firms)

Although consumers show an initial preference for certainty, removing that certainty does not mean they stop investing. They might be disappointed, but that alone is not enough to make them pull out of their investment. However, we only exposed them to positive outcomes here, albeit low. It is conceivable that the experience of a loss is more confidence eroding after a certain than an uncertain forecast. Indeed, experiencing losses is likely to have a stronger effect on consumers pulling out than experiencing incorrect forecasts. Notably, experiencing that a certain forecast was deceptive does not necessarily make consumers generally suspicious of them. It may take multiple exposures across multiple providers for consumers to learn this.

Unfortunately, our findings are less favourable for firms. Communicating with certainty does erode trust if unwarranted, even though it might draw people in. It might be tempting to give consumers confidence when they initially invest, but this is not a viable long-term strategy. A better approach to retain loyal and resilient consumers in the long run, is to manage the uncertainty - rather than trying to hide it.


  • E. Batteux, A. Bilovich, S. Johnson, and D. Tuckett, “Impressed by Numbers: The Extent to Which Novice Investors Favor Precise Numerical Information in a Context of Uncertainty,” SSRN Electron. J., 2020.