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Does financial literacy affect the value of financial advice? A contingent valuation approach

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  • Chauhan, Yogesh
  • Dey, Dipanjan Kumar

Abstract

The paper examines the determinants of investors’ willingness to pay (WTP) for suitable advice. We use contingent valuation, a method frequently used to estimate the value of non-market goods and services, with a unique survey data to estimate WTP for suitable advice. We find that investors with a high level of financial literacy recognize the value of financial advice; therefore, they have a higher WTP. These investors are also less likely to consult with a financial adviser if the advisory fee exceeds investors’ maximum WTP. We also suggest the policy implications of our empirical results.

Suggested Citation

  • Chauhan, Yogesh & Dey, Dipanjan Kumar, 2020. "Does financial literacy affect the value of financial advice? A contingent valuation approach," Journal of Behavioral and Experimental Finance, Elsevier, vol. 25(C).
    • Handle: RePEc:eee:beexfi:v:25:y:2020:i:c:s2214635019302606
    DOI: 10.1016/j.jbef.2020.100268
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    2. Li, Xiao, 2020. "When financial literacy meets textual analysis: A conceptual review," Journal of Behavioral and Experimental Finance, Elsevier, vol. 28(C).
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    5. Cruciani, Caterina & Gardenal, Gloria & Rigoni, Ugo, 2021. "Trust-formation processes in financial advisors: A structural equation model," The Quarterly Review of Economics and Finance, Elsevier, vol. 82(C), pages 185-199.

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    More about this item

    Keywords

    Willingness to pay; Financial literate; Financial advice; Mutual funds; Household finance;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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