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- Title
Financially Sound Households Use Financial Planners, Not Transactional Advisers.
- Authors
Blanchett, David M.
- Abstract
• Financial advisers can add significant value for clients, but empirical evidence documenting this effect is mixed. • This paper explores how household financial decision-making varies by four sources of information: financial planners; transactional financial advisers; friends; or the Internet. • Five aspects of decision-making were explored: portfolio risk levels; savings habits; life insurance coverage; revolving credit card balances; and emergency savings using the six most recent waves of the Survey of Consumer Finances (2001 to 2016). • Households working with a financial planner were found to be making the best overall financial decisions, followed by those using the Internet, while those working with a transactional adviser were making the worst financial decisions. • Selection bias is a potential issue with the results, since the decision to work with a financial planner is a positive indicator of financial decision-making and potentially endogenous to variables considered. However, these findings do suggest that the potential value of financial advice may vary significantly based on the nature of the financial engagement and that households are likely better off working with an adviser that is more comprehensive (e.g., a financial planner) than transactional in nature.
- Publication
Journal of Financial Planning, 2019, Vol 32, Issue 4, p30
- ISSN
1040-3981
- Publication type
Academic Journal