Wade Matterson, of actuarial firm Milliman, addressed the Meet the Managers roadshows last week.

He said with persistently low interest rates, and income products that are expensive for the returns they offer, more investors are choosing higher-risk investments than they otherwise would.

But that puts them more at risk of suffering the fallout of poor investing decisions.

Matterson pointed to data showing that over the past 20 years, the average equity fund investor had experienced returns that were about a quarter of those of the S&P500. “It’s not a small gap, it’s significant,” he said.

That was driven by behavioural patterns that drove investors to sell at the worst possible time, he said, buying driven by greed and selling driven by fear.

“There’s a risk tolerance paradox. People need access to growth because they can’t lock in low rates of return and expect their money to last as long as they do. But how do they maintain growth and at the same time avoid risk?”

Matterson said there had been a number of attempts made to manage the issues including guarantees, lifecycle funds, smart beta and absolute return investing, but implementation and effectiveness were the main issues.

“We can talk about asset classes, which shares we think are going to outperform, but at the end of the day it’s people investing. It doesn’t matter if we give them the best product or the thing we think is the hottest performing stock, if we can’t get people to make the decision to go down the path and stay the course.”

Advisers were a key part of the solution.

“They need to avoid the animal instincts that emerge. We are starting to see that either in the way products are constructed or the advice given, there is a much greater focus on meeting the objectives of the client base.

“At the end of the day, people are their own worst enemies. That’s where financial advice is important. Ultimately they will make a decision at the worst time to their own detriment.”

But he said advisers were also under pressure, expected to offer assistance to a wider range of clients under higher regulatory standards in an environment where it was hard to charge the same fees.

“You’re dealing with complex issues, expected to make less for it, deal with more people in a shorter time so there’s a huge range of issues facing the industry now.”