In addition to encouraging trading, gamification can be used to encourage positive habits such as portfolio diversification, a new study finds.Aleksandra Abramova/iStockPhoto / Getty Images
A fundamental challenge in engaging clients with their investments is that most of the stuff that’s fun is best left alone, while the actions that benefit portfolios long-term are boring.
For example, picking stocks and trading them can be fun. Especially when buying or selling is greeted with confetti and badges, and your name is celebrated on a leaderboard of the most active traders.
Inching toward a long-term goal by making monthly deposits in a balanced portfolio, on the other hand, is not going to get hearts racing.
A 2022 study by the Ontario Securities Commission (OSC) and the Behavioural Insights Team (BIT) found participants who received points for trading stocks made almost 40 per cent more trades – even though the points had no real value. A follow-up study in 2024 found that promoting stocks on social media and having the ability to copy other users’ trades also led to increased trading.
Some online investment platforms have been shrewd about making the fun part of investing even more fun, encouraging investors to trade and take risks with overly concentrated portfolios, while regulators have fretted about what it means for the long-term financial health of the growing cohort of Canadians choosing to invest on their own.
Now, regulators are making the case that the boring part can be a game, too.
Another OSC study conducted with BIT released this week shows certain gamification techniques can encourage the pursuit of long-term goals and portfolio diversification – and even reduce compulsive behaviour.
The study included an experiment in which more than 4,000 participants invested a hypothetical $10,000 across eight equities in a simulated online trading environment.
The investors were given a score out of 100 for their diversification level, which they could compare to other users on a leaderboard. They were also asked to set diversification goals and track their progress, and were awarded badges for meeting certain thresholds.
All four techniques “had a modest, yet meaningful increase in diversification” of 3.5 per cent to 4.5 per cent, the report said, with the diversification score the most effective.
The study reveals potential new avenues for advisors seeking to engage clients in positive ways.
In addition to low costs, part of the growing do-it-yourself investing channel’s appeal has been how engaging the platforms are. The study notes that the four techniques used – a score, goal framing, leaderboards and rewards or badges – are commonly used on digital investing platforms to encourage behaviour such as trading.
But they could also be used to encourage positive behaviour beyond just portfolio diversification, such as reducing overtrading or engaging with educational material.
Other potential positive uses include encouraging savings habits and appropriate risk-taking, and deterring scams, the report said.
For advisors, gamifying elements such as setting and achieving goals, or comparing savings in a tax-free savings account or registered retirement savings plan against an average, could also be options.
Are you using gamification techniques with clients? Is this a good idea? Let us know what you or your firm are doing.
- Mark Burgess, Globe Advisor assistant editor
Must reads
What a drag: A conversation about taxation can be a drag for clients, but so is the “tax drag” from foreign assets held in registered retirement savings plans. Joel Schlesinger breaks down the foreign withholding tax on dividend income and how to avoid it.
On the Move: When Jeff Lucyk left his financial services job 14 months ago, he wanted to start a new career as a counsellor specializing in addiction and mental health. A few months before finishing a one-year graduate certificate program, he was approached by Toronto-based Hamilton ETFs to become its head of sales – an offer he says was too good to turn down, as he still has time to pursue his counselling work. Brenda Bouw reports on this and other recent hires in our new series, On the Move.
Proceed with caution: Regulators are taking a greater interest in finfluencers, a move that may put investment industry firms that partner with online content creators on the hook for any investment information those creators post on their behalf. Kelsey Rolfe reports.
More from The Globe
Hedging risk: A small number of hedge funds are playing an outsized role in the Government of Canada bond market, improving market efficiency but creating potential financial stability risks, Mark Rendell reports.
Succession plan: Brookfield Asset Management Ltd. named Connor Teskey its chief executive officer, following through on a long-expected succession plan for veteran CEO Bruce Flatt. James Bradshaw reports.
Downsize delayed: Across Canada, young adults struggling with housing affordability are staying home longer, and even those who move out are leaving belongings behind because of limited space in their new homes. For many families, that means parental homes are doubling as long-term storage units, delaying downsizing plans, writes Meera Raman.