The decision-making behaviour of trustees of self-managed superannuation funds

The focus of this thesis is decision making by trustees of Self-Managed Superannuation Funds (SMSF). SMSFs have grown exponentially since their inception in 1999. As of June 2019, they had over 1.1 million members and accounted for more than a quarter of Australia's $2.9 trillion superannuation sector. Given the significance of these funds, it is important to study how SMSF trustees make their investment decisions. To the extent that many SMSF trustees may not have a financial background, their investment decisions are likely to be sub-optimal. As such, this thesis investigates the decision-making behaviour of SMSF trustees. Behavioural attributes are examined using the Four Quadrant Model (FQM) developed by Lovric, Kaymak, and Spronk (2010), comprising of the cognitive, affective, controlled and automatic quadrants. The FQM is a combination of two closely related Dual Process Theories (DPT) and both the theories and the model have their basis in the cognitive and behavioural sciences. This thesis uses both qualitative and quantitative methods. The qualitative study presents results from 18 semi-structured interviews with SMSF trustees and SMSF advisers, as well as a survey of 201 SMSF trustees. The results of the qualitative study provide support for the quantitative study, which uses the FQM model to explain investment decision making. The model can also be used to predict those trustees who seek investment advice as well as those who, ignore it and act in an independent manner. The FQM model was also associated with different styles of investment decision making by the SMSF trustees and investors classifying them as either active or passive investors. Importantly, the mixed methods approach establishes that investment knowledge and expertise is not always the basis for investment decision making. In finding that FQM and behavioural attributes are driving factors of SMSF trustee investment decisions, this thesis makes an original contribution to the literature on investment decision making in the Australian superannuation context. A key finding of the research is that investment decision making will often include emotions and feelings as overriding influences and that nonrational behaviour can, and does determine investment decisions. The research findings may be informative to Australian policy makers in developing financial education programs and in future policy changes pertaining to SMSFs.