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Keeping Your Financial Planner to Yourself: Racial and Cultural Differences in Financial Planner Referrals

  • Danielle Winchester

    ()

  • Sandra Huston

    ()

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    Literature suggests that the use of a financial expert by Black households improves savings and investment behaviors. However, these households lack the financial knowledge and sophistication needed to select an appropriate financial expert. This admitted inability results in Black households relying on the recommendations of friends and family in selecting and hiring a financial expert. However results from this study suggest that Blacks who have successfully chosen a financial expert, i.e., are satisfied, are nearly two times (92 %) less likely than non-Blacks to refer their financial planner to others. Decomposition analyses indicate that over 80 % of satisfied Blacks should be willing to provide a referral yet only 50 % do. The largest significant component of the difference in referral rates is culturally based perception differences of the variables used in determining the net benefit of providing a referral. Copyright Springer Science+Business Media New York 2013

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    File URL: http://hdl.handle.net/10.1007/s12114-012-9153-3
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    Article provided by Springer in its journal The Review of Black Political Economy.

    Volume (Year): 40 (2013)
    Issue (Month): 2 (June)
    Pages: 165-184

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    Handle: RePEc:spr:blkpoe:v:40:y:2013:i:2:p:165-184
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    1. Annamaria Lusardi & Olivia S Mitchelli, 2007. "Financial Literacy and Retirement Preparedness: Evidence and Implications for Financial Education," Business Economics, Palgrave Macmillan, vol. 42(1), pages 35-44, January.
    2. Maury Gittleman & Edward N. Wolff, 2004. "Racial Differences in Patterns of Wealth Accumulation," Journal of Human Resources, University of Wisconsin Press, vol. 39(1).
    3. Datcher, Linda, 1983. "The Impact of Informal Networks of Quit Behavior," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 491-95, August.
    4. Francine D. Blau & John W. Graham, 1989. "Black-White Differences in Wealth and Asset Composition," NBER Working Papers 2898, National Bureau of Economic Research, Inc.
    5. Sumit Agarwal & Gene Amromin & Itzhak Ben-David & Souphala Chomsisengphet & Douglas D. Evanoff, 2009. "Do financial counseling mandates improve mortgage choice and performance? Evidence from a legislative experiment," Working Paper Series WP-09-07, Federal Reserve Bank of Chicago.
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