How to Meet Private Investors' Advisory Needs

27 Pages Posted: 27 Aug 2007 Last revised: 23 May 2008

See all articles by Christian Jansen

Christian Jansen

EBS Universität für Wirtschaft und Recht - EBS Business School - Department of Finance and Accounting

Andreas Hackethal

Goethe University Frankfurt - Faculty of Economics and Business Administration; Goethe University Frankfurt - Research Center SAFE

Date Written: January 2008

Abstract

This paper empirically investigates a novel approach for financial advisors to enhance customer satisfaction by segmenting customers based on their financial sophistication. We surveyed 761 customers of two German retail banks on their satisfaction with their latest purchase of an investment product. Customers had to state their perception of the advisory service that led to the purchase. In addition, their individual level of financial sophistication was evaluated. Results show that financial sophistication varies considerably among respondents and that the level of financial sophistication critically affects approval of a specific advisory approach. We find that customer satisfaction would increase significantly if banks offered a tailored advisory approach to the different customer groups. Advisors who take into account investors' financial sophistication can increase customer acceptance of their recommendations and thereby better assist their advisees in improving decision making. The paper contributes to the role of financial advice in investor decision making which is an increasingly important issue that has not been addressed in any detail in literature. This is the first study that empirically analyses the implications of behavioral investor characteristics on the optimal design of financial advisory.

Keywords: Retail banking, financial advisory, customer segmentation, financial sophistication

JEL Classification: G21, D14

Suggested Citation

Jansen, Christian and Hackethal, Andreas, How to Meet Private Investors' Advisory Needs (January 2008). 20th Australasian Finance & Banking Conference 2007 Paper. Available at SSRN: https://ssrn.com/abstract=1009194 or http://dx.doi.org/10.2139/ssrn.1009194

Christian Jansen (Contact Author)

EBS Universität für Wirtschaft und Recht - EBS Business School - Department of Finance and Accounting ( email )

Gustav-Stresemann-Ring 3
Wiesbaden, Hessen 65189
Germany

Andreas Hackethal

Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )

Theodor-W.-Adorno Platz 3
Frankfurt am Main, 60323
Germany

Goethe University Frankfurt - Research Center SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

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