Voice trading leads to smaller investments, research shows

People make different investment decisions based simply on the way they execute their trades, according to new Gies assistant professor Alex Vandenberg.

“On many popular online investment platforms, investors can now trade stocks simply by talking aloud, and my research suggests that they end up investing less money when they use their voice,” said Vandenberg, who this summer joined Gies Department of Accountancy after completing his PhD at the University of Pittsburgh. “I imagine that most people would agree that their investment decisions should not depend on whether they submit their investment order by talking aloud or clicking buttons on their screen.”

Vandenberg’s research focuses on the pain of payment – the psychological discomfort people feel when they spend money.

“Giving up money is often a painful experience, even when receiving something in return,” said Vandenberg. “Vocalizing an investment order exacerbates this pain – it hits harder than clicking buttons on a phone or computer. As a result, people ultimately invest less money when using their voice to trade.”

Vandenberg’s dissertation paper, “How Does Voice Trading Affect Investor Decisions,” found that the pain of payment is highest when investors use their voice and invest money that they earned. Investors also better remember how much they invested because pain makes the investment more memorable.

“I became interested in this subject because there was a growing concern from regulators that advances in the design and functionally of online investment platforms could cause individual investors to make flippant trades and spend more than they otherwise would,” said Vandenberg. “But my research shows that voice trading does not lead to those negative outcomes regardless of a person’s age or familiarity with voice apps.”

Vandenberg grew up in Wisconsin and earned a bachelor’s degree in accounting and economics from St. Norbert College in De Pere, WI. He says he pursued accounting for his advanced degrees because he was interested in studying managers’ and investors’ accounting-related judgments.

“Advances in FinTech are changing how individuals engage with accounting information,” said Vandenberg. “My goal is to help investors and regulators recognize the potential consequences of these technologies and to help ensure that accounting practices continue to satisfy the needs of small investors.”

While at Pitt, Vandenberg partnered with associate professor Nicole Cade to study how the design of virtual financial advisors (VFAs) affects investors. The findings show wealth management firms and regulators that subtle design choices for VFAs can influence investors.

“VFAs are an increasingly popular type of robo-advisor that communicate with investors through written text or speech and typically present as female or male,” said Vandenberg.

Because gender presentations and communication mode of VFAs vary considerably in practice, the research team set out to test whether these design features affect investors’ reliance on VFAs.

“Prior research suggests that the gender of a communicator and the mode through which information is communicated affects reactions to that information,” said Vandenberg. “However, it wasn’t clear to us whether this research would extend to VFAs, given that VFAs are not human.”

Through three experiments, the research team found that investors are most willing to rely on VFAs who communicate orally and present as female.

“We initially thought that investors would favor VFAs who present as male because gender-stereotypes have historically favored males in investing contexts,” said Vandenberg. “But we found that investors are most willing to rely on advice from a female VFA who speaks aloud because its voice activates the gender-stereotype of females being highly responsive to others’ needs.”

Vandenberg said he was drawn to Gies because of its dual emphasis on research and teaching. His long-term goal is to better understand how technology is changing the way investors use and understand accounting information and make decisions based on it.

“Gies is at the forefront of accounting education, both in terms of research and teaching. I am really grateful for the chance to work with the faculty and students here,” said Vandenberg, who will be teaching ACCY 301: Accounting Measurement & Disclosure of Class. “It’s rare for a school to excel in both research and teaching. The faculty at Gies sincerely care about the accounting profession and accounting education; it’s why our students are so successful.”