The consumer bias towards deceptively precise financial projections

by Eleonore Batteux, Avri Bilovich, Samuel Johnson and David Tuckett
Posted on March 25, 2020

Impressed by numbers?

Consumers enjoy being shown very precise financial projections to help them make various financial decisions. But do they realise that the more precise a projection, the more it is likely to be wrong? Our research suggests they do not. And that's a problem, because consumers tend to believe that their investment returns are more certain than they actually are, and they plan for the future on that basis. Policy-makers ought to protect consumers from providers who mislead them by showing deceptively precise financial projections.

Our research shows that consumers invest more when given precise growth projections, rather than vague ones which more accurately account for the inherent uncertainty of financial markets1. Between October and December 2019, we ran a series of studies with around 1300 participants from the general U.K. population with little to no investment experience. We introduced them to investment funds communicating various projections of growth, expressed as either precise (for instance "3%") or vague (for instance "1 to 5%") projections. Our results show that precise projections led to higher investments, and that participants reported more confidence both in their own investments and in the analyst who provided them with the projections.

“Consumers are drawn to precise projections, even when told these are deceptive”

Warning statements: no difference

This behaviour persists when consumers are shown the limitations of precise projections, which is particularly concerning. Displaying a fund’s variable past performance, for instance, did not change the fact that participants invested more in precise projections. Even including warning statements about potential losses and projections not being guaranteed did not make a difference. Consumers are drawn to precise projections, even when told these are deceptive. This suggests that current regulations in the US and the UK, stipulating that financial projections must be accompanied by a statement warning that they are not guaranteed, are not likely to be effective. The same goes for statements warning that a fund’s past performance is not indicative of its future performance2. In summary, current regulations do not adequately protect consumers against misleading information.

The good news is that once participants were prompted to realise that precise projections are misleading, we find that they are drawn away from them. Before investing in a fund, we let participants experience its past projections and actual performance. This allowed them to see that precise projections are often not realised. After that, participants did not invest more in funds with precise rather than vague projections. They reported less trust in the analyst providing the precise projections, even when told that vague projections could be wrong too. In other words: in the right circumstances, consumers are indeed able to see the limits of precise projections, which in turn affects their investment behaviour and their perception of financial providers.

“Precise projections are not indicative of a financial provider’s success”

When trust drops

Not only do precise projections let consumers down, they also lead to less favourable judgments of financial providers. This is concerning at a time when trust in financial services is already low3. With a global recession potentially around the corner, the level of trust is about to drop even further. In the long run, attracting consumers with deceptively precise financial projections is likely to backfire. Indeed, trust is granted to those who behave ethically and with integrity3. People are particularly worried about their economic future, meaning they may rely on financial projections more than before.

The bias towards deceptively precise financial projections means that consumers are drawn to providers for the wrong reasons. Contrary to popular belief, precise projections are rarely realised, and are not indicative of a provider’s success. This can only lead to disappointment, particularly if consumers rely on those projections when managing their money. Regulations should be put in place to protect consumers from making decisions based on misleading information. Crucially, these regulations should be tested first to ensure they have the intended effects on consumers. Coping with uncertainty allows people to take opportunities they would otherwise have missed due to the anxiety that uncertainty so often breeds4. If our society is to be resilient to future challenges, it needs to be able to face its inherent uncertainty.


  • E. Batteux, S. Johnson, D. Tuckett, and A. Bilovich, “Impressed by numbers: the extent to which novice financial investors favour precise numerical information in a context of uncertainty.”
  • M. Mercer, A. R. Palmiter, and A. E. Taha, “Worthless Warnings? Testing the Effectiveness of Disclaimers in Mutual Fund Advertisements,” J. Empir. Leg. Stud., vol. 7, no. 3, pp. 429–459, 2010.
  • Edelman, “Edelman Trust Barometer 2020,” 2020.
  • N. Shragai, “Resilience is essential to thrive in an unpredictable future,” Financial Times, 2020.