IDEAS home Printed from https://ideas.repec.org/p/mea/meawpa/201501.html
   My bibliography  Save this paper

Do Seemingly Smarter Consumers Get Better Advice?

Author

Listed:
  • Bucher-Koenen, Tabea

    ()

  • Koenen, Johannes

    (Munich Center for the Economics of Aging (MEA))

Abstract

In this paper, we study the interaction between financial advisors and customers with a potential conflict of interest. We show in a simple analytical framework that advisors have an incentive to provide better advice to consumers who appear to be better informed. From this, we derive an identification strategy to infer the quality of advice received from variables observed in a representative survey of German consumers. Our identification strategy makes use of the fact that we observe both a generally observable signal of a customer's financial literacy as well as an objective measure, which is not observed by the advisor. We apply this strategy to three different empirical settings. In each of these settings, we find consistent evidence that consumers with worse signals of financial literacy on average receive worse financial advice. In particular, both women and individuals without tertiary education are negatively affected.

Suggested Citation

  • Bucher-Koenen, Tabea & Koenen, Johannes, 2015. "Do Seemingly Smarter Consumers Get Better Advice?," MEA discussion paper series 201501, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
  • Handle: RePEc:mea:meawpa:201501
    as

    Download full text from publisher

    File URL: http://mea.mpisoc.mpg.de/uploads/user_mea_discussionpapers/1630_01-2015.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Gasche, Martin & Bucher-Koenen, Tabea & Haupt, Marlene & Angstmann, Simon, 2013. "Die Kosten der Riester-Rente im Vergleich," MEA discussion paper series 201304, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    2. Barberis, Nicholas & Thaler, Richard, 2003. "A survey of behavioral finance," Handbook of the Economics of Finance,in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 18, pages 1053-1128 Elsevier.
    3. Michael Ziegelmeyer, 2013. "Illuminate the unknown: evaluation of imputation procedures based on the SAVE survey," AStA Advances in Statistical Analysis, Springer;German Statistical Society, vol. 97(1), pages 49-76, January.
    4. Xavier Gabaix & David Laibson, 2018. "Shrouded attributes, consumer myopia and information suppression in competitive markets," Chapters,in: Handbook of Behavioral Industrial Organization, chapter 3, pages 40-74 Edward Elgar Publishing.
    5. Santosh Anagol & Shawn Cole & Shayak Sarkar, 2012. "Understanding the Advice of Commissions-Motivated Agents: Evidence from the Indian Life Insurance Market," Harvard Business School Working Papers 12-055, Harvard Business School, revised Oct 2015.
    6. Börsch-Supan, Axel & Coppola, Michela & Reil-Held, Anette, 1970. "Riester Pensions in Germany: Design, Dynamics, Targetting Success and Crowding-In," MEA discussion paper series 201220, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Börsch-Supan, Axel & Bucher-Koenen, Tabea & Goll, Nicolas & Maier, Christina, 2016. "15 Jahre Riester - eine Bilanz," Working Papers 12/2016, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.
    2. repec:spr:jbecon:v:87:y:2017:i:5:d:10.1007_s11573-017-0853-9 is not listed on IDEAS
    3. M. Debbich, 2015. "Why Financial Advice Cannot Substitute for Financial Literacy?," Working papers 534, Banque de France.

    More about this item

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mea:meawpa:201501. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Henning Frankenberger). General contact details of provider: http://www.mea.mpisoc.mpg.de/ .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.