2013 Conference

Financial Services

Financial Services

This study uses a little-known set of panel data to examine the effects of financial advice on people’s financial behaviors over time. Previous research has mainly used cross-sectional datasets, such as the Survey of Consumer Finances, to analyze the effects of socio-demographic and financial household characteristics on the use of financial planners as well as the outcomes of advice seeking. This study contributes to the mission of ACCI – to enhancing consumer wellbeing – by examining the triggers and outcomes of the decision to obtain professional financial advice. This policy- and protection-relevant research will result in recommendations for guiding consumer advice-taking behaviors.

Under the planner-doer model in the behavioral life-cycle hypothesis (Shefrin and Thaler, 1988), we assume that the farsighted planner values and seeks professional financial advice in order to build a better plan, while the myopic doer’s plan may suffer from self-control problems. Our hypothesis is that the effects of professional financial advice are more positive and persistent for consumers in the “planner” category rather than the “doer” category.

Descriptive analysis shows the expected positive effects, i.e., that for consumers who begin to use professional financial advice average annual savings as well as the amount of savings in emergency funds increases.

The next steps in this research are: (1) to examine whether the impact of financial advice on people’s financial behaviors over time holds in multivariate analysis; (2) to test whether the impact of professional financial advice differs with regard to psychological variables, such as for consumers with high/low self-control and future orientation; and (3) to use a cross-sectional approach for comparing findings with the Survey of Consumer Finances for the questions that are comparable in their wording. We are confident about having completed these steps before the conference in April.