Financial Literacy and the Demand for Financial Advice
AbstractThe low level of financial literacy in many countries suggests that households are at risk of sub-optimal financial decisions. In this paper we assess to what extent financial advisors can substitute for such a lack of knowledge, by analyzing the effect of investors’ financial literacy on their decision about how much to rely on financial advisors. We model the strategic interaction between poorly informed investors and perfectly informed advisors facing conflicts of interest. We find that more knowledgeable investors are more likely to consult advisors, while less informed ones either invest by themselves (without any professional advice) or delegate their portfolio choice, suffering the agency costs of such decision. These results are confirmed empirically, where we investigate the effect of financial literacy on the demand for financial advice using the 2007 Unicredit Customers’ Survey. Overall, our results suggest that non-independent advisors are not sufficient to alleviate the problem of low financial literacy.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Center for Research on Pensions and Welfare Policies, Turin (Italy) in its series CeRP Working Papers with number 117.
Length: 53 pages
Date of creation: Apr 2011
Date of revision:
Financial Literacy and the Demand for Financial Advice;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-04-30 (All new papers)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Robert L. Clark & Annamaria Lusardi & Olivia S. Mitchell, 2014. "Financial Knowledge and 401(k) Investment Performance," NBER Working Papers 20137, National Bureau of Economic Research, Inc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Silvia Maero) The email address of this maintainer does not seem to be valid anymore. Please ask Silvia Maero to update the entry or send us the correct address.
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.