Hostname: page-component-77f85d65b8-7lfxl Total loading time: 0 Render date: 2026-03-29T02:56:47.577Z Has data issue: false hasContentIssue false
  • English
  • Français

Trust and financial advice

Published online by Cambridge University Press:  14 November 2019

Jeremy Burke  and
Angela A. Hung
Jeremy Burke
Affiliation:
University of Southern California, Center for Economic and Social Research, Washington, DC, USA
Angela A. Hung*
Affiliation:
RAND Corporation, Santa Monica, CA, USA
*
*Corresponding author. Email: jeremy.burke@usc.edu
Get access Rights & Permissions [Opens in a new window]

Abstract

We explore the relationships between financial trust and behaviors, attitudes, knowledge, and preferences related to utilizing professional financial advice. Using survey data from the RAND American Life Panel, we find that financial trust is correlated with advice usage and likelihood of seeking advisory services. Leveraging an experiment that randomized provision of and access to advice, we find that trust is an important predictor of who chooses to receive advice, even after controlling for demographic characteristics and financial literacy. However, providing unsolicited advice has little impact on behavior, even for individuals with high levels of trust.

Keywords

Financial advicefinancial literacyretirement savingstrustD14D91

Information

Type
Article
Information
Journal of Pension Economics & Finance , Volume 20 , Issue 1 , January 2021 , pp. 9 - 26
Copyright
Copyright © Cambridge University Press 2019

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Article purchase

Temporarily unavailable

References

Agnew, JR and Szykman, LR (2005) Asset allocation and information overload: the influence of information display, asset choice, and investor experience. The Journal of Behavioral Finance 6, 57–70.CrossRefGoogle Scholar
Agnew, JR, Szykman, LR, Utkus, SP and Young, JA (2012) Trust, plan knowledge and 401(k) savings behavior. Journal of Pension Economics and Finance, 11, 1–20.CrossRefGoogle Scholar
Calcagno, R and Monticone, C (2015) Financial literacy and the demand for financial advice. Journal of Banking and Finance 50, 363–380.CrossRefGoogle Scholar
El-Attar, M and Poschke, M (2011) Trust and the choice between housing and financial assets: evidence from Spanish households. Review of Finance 15, 727–756.CrossRefGoogle Scholar
Guiso, L, Sapienza, P and Zingales, L (2008) Trusting the stock market. The Journal of Finance 63, 2557–2600.CrossRefGoogle Scholar
Helman, R and VanDerhei, J and Copeland, C (2007) The Retirement System in Transition: The 2007 Retirement Confidence Survey. EBRI Issue Brief. No. 304.Google Scholar
Hilgert, MA, Hogarth, JM and Beverly, SG (2003) Household financial management: the connection between knowledge and behavior. Federal Reserve Bulletin 89, 309.Google Scholar
Holt, CA and Laury, S (2002) Risk aversion and incentive effects in lottery choices. American Economic Review 92, 1644–1655.CrossRefGoogle Scholar
Hung, AA and Yoong, J (2013) Asking for help: Survey and experimental evidence on financial advice and behavior change. In Mitchell, OS and Smetters, K (eds), The Market for Retirement Financial Advice. Oxford, United Kingdom: Oxford University Press, pp. 182–212.CrossRefGoogle Scholar
Hung, AA, Clancy, N, Dominitz, J, Talley, E and Berrebi, C (2008) Investor and Industry Perspectives on Investment Advisers and Broker-Dealers, vol. 767. Santa Monica, CA: Rand Corporation.CrossRefGoogle Scholar
Lusardi, A (2008) Household Saving Behavior: The Role of Financial Literacy, Information, and Financial Education Programs. NBER Working Paper 13824.CrossRefGoogle Scholar
Lusardi, A and Mitchell, OS (2007) Financial literacy and retirement planning: New evidence from the RAND American Life Panel. MRRC Working Paper No. 2007-157.CrossRefGoogle Scholar
Lusardi, A and Mitchell, OS (2011) Financial literacy and planning: Implications for retirement well-being. In Lusardi, A and Mitchell, O (eds), Financial Literacy. Implications for Retirement Security and the Financial Marketplace. Oxford, United Kingdom: Oxford University Press, pp. 17–39.Google Scholar
Mottola, GR and Utkus, SP (2008) Red, yellow and green: Measuring the quality of 401(k) portfolio choices. In Lusardi, A (ed.), Overcoming the Savings Slump. Chicago, IL, USA: University of Chicago Press, pp. 119–139.Google Scholar
TIAA-CREF (2013) Financial Advice Survey: Executive Summary. https://www.tiaa-cref.org/public/pdf/TIAA-CREFAdviceSurveyExecutiveSummary2013.pdf.Google Scholar
Van Rooij, M, Lusardi, A and Alessie, R (2011) Financial literacy and stock market participation. Journal of Financial Economics. 102, 449–472.CrossRefGoogle Scholar