A Picture Is Worth a Thousand Dollars: Visual Aids Promote Investor Decisions

Abstract

Policymakers emphasize that fees should be an important consideration in making investment decisions that support savings, retirement and other consequential, long term financial outcomes. Nevertheless, retail investors tend to prioritize recent returns. In nonfinancial domains, visual aids designed with choice architecture principles help convey complex quantitative information and reduce decision biases. The current work explores how a variety of mutual fund visual aids affect investment decisions. Across three studies, including two with incentivized national samples (N=4,588), we demonstrate that visual aids displaying mutual fund fees lower fees paid by up to 25% compared to legally compliant disclosure documents. We address important public policy implications relevant to investors and regulators.