Study shows modest diversification gains while outlining guardrails advisors should understand
The Ontario Securities Commission has released new research examining how gamification techniques used on digital investment platforms can be designed to improve, rather than undermine, retail investor outcomes.
The study, titled Gamification and Retail Investing: Positive Use Cases and Mitigation Techniques, builds on the regulator’s ongoing work into digital engagement practices and their impact on investor behaviour. It focuses on how common game-like features can influence decision making and what safeguards may be required to reduce potential harm.
As part of the research, the OSC conducted an online experiment with more than 4,000 Canadian participants. Each participant was asked to construct a hypothetical $10,000 portfolio across eight stocks while being exposed to one of four gamification interventions or a control condition. The four techniques tested included a diversification badge, a diversification score, a leaderboard and a goal-setting prompt.
According to the findings, each of the gamification tools led to a measurable increase in portfolio diversification compared with the control group. The improvement ranged from 3.5 per cent to 4.5 per cent, depending on the technique used. The OSC noted that while the effects were modest, they were statistically significant and consistent across interventions.
The research challenges the assumption that gamification is inherently problematic. In its news release accompanying the report, the OSC stated that the results demonstrate how gamification, when thoughtfully designed, can encourage behaviours aligned with better investment outcomes, particularly diversification.
At the same time, the report emphasizes that gamification can also amplify behavioural risks if poorly implemented. The OSC outlines mitigation techniques intended to reduce the likelihood that game-like features lead to excessive trading, overconfidence or impulsive decision-making. These include adding friction to high-risk actions, improving disclosures, and pairing engagement tools with educational content.
The report notes that regulators, firms and advisors all have a role to play in ensuring that digital engagement practices are aligned with investors’ long-term interests. It suggests that the same behavioural insights used to increase engagement can also be applied to promote sound investment principles.
As more investors interact with markets through digital-first tools, understanding how gamification affects decision-making may become increasingly relevant to portfolio construction discussions, client education and risk management.
The OSC’s research ultimately concludes that gamification is neither inherently good nor bad. Its impact depends on design choices, context and the presence of appropriate safeguards focused on investor protection and outcomes.
