Introduction

• Introduction to the day and the format
• Setting objectives

The underlying principles

• Understanding the definitions of behavioural economics and its uses
• Comparisons with traditional economics: how it differs in substance and use
• An introduction to the key unconscious biases that affect decisions and behaviour
• The role of social influence in purchasing decisions
• The difference between regret-aversion and loss-aversion
• How framing of information affects consumer choices 
• An overview of the relevant academic literature
• How behavioural experiments can be used to investigate consumer behaviour

Refreshments

The FCA’s understanding and application of behavioural economics

• Why regulators are interested in behavioural economics and what they’re saying about it
• Outlining the key points from the FCA’s paper on the subject
• What evidence could organisations provide to demonstrate they are meeting the regulators expectations?
• Examining some product or service features that could cause more concern for the FCA
• Relevance of behavioural economics for the FCA’s new objective to promote effective competition
• How are other relevant organisations – such as the CMA – applying behavioural economics?

Interactive breakout session

Delegates will now take part in a behavioural experiment that will illustrate one of the points discussed in the FCA’s paper. The outcome of this experiment and its relevance will then be discussed by the group

Lunch

Applying behavioural economics in retail financial services

• Why and how key characteristics of retail financial services require behavioural economics:
  • Complex products, including complexity in pricing frames
  • Risk and uncertainty
  • Infrequent purchases with little opportunity for learning from past experience
  • Products with multiple parts and add-ons
  • Bundled products
  • Emotional decisions
  • Trade-offs between present and future
• Which preferences, beliefs and rules-of-thumb apply most to financial decisions?
• Why status-quo bias is so pertinent to financial services
• Why individuals find mental accounting difficult and what it means for financial products

Interactive breakout session

Delegates will now break into groups to work on a case study, identifying which of the biases covered are most likely to affect the product or service they have been asked to consider and how this can best be rectified. The outcomes of each discussion will then be shared with the group.

Refreshments

Behavioural economic experiments: design and application

• Explaining what makes a good behavioural experiment and why they are useful
• Case studies of behavioural experiments in practice:
  • FCA (2013) “Encouraging consumers to claim redress: evidence from a field trial”
  • London Economics (2014) “Study into the sales of Add-on General Insurance Products: Experimental consumer research”, a report for the FCA
  • London Economics (2011) “Evidence from consumer experiments”, a study informing the OFT’s market study on consumer contracts
  • London Economics (2010) “The impact of price frames on consumer decision making”, a study for the OFT
• How were these designed and what factors needed to be taken into account?
• What were the key findings and how have they been used?
• Designing a behavioural experiment to meet your requirements: what needs to be considered?

Next steps and application in your organisation

• Identifying where behavioural economics could be most beneficial for your organisation
• Quick wins: which bits of information from today could help colleagues adapt their approach tomorrow
• Applying lessons from existing research to your current practices or future plans
• What you need to know before commissioning your own behavioural economic experiments  
• An overview of the key lessons from the day
• Final Q&A

End of course