Quantifying the Economic Benefits of Personal Financial Planning

18 Pages Posted: 18 Jul 2011 Last revised: 24 Feb 2013

Date Written: July 18, 2010


To estimate the monetary value of ideal financial planning advice, we address three types of benefits that planners provide: increasing wealth, preventing loss, and smoothing consumption. We discuss, then reject the possibility of using survey data to obtain valid estimates of the benefit of financial planning advice. We instead use theoretical examples based on comparisons of optimal decisions to naive alternatives. We find that the value of advice varies with a client's risk aversion and the percentage of wealth that could be gained or lost. In general, the most risk averse households should place the highest value on comprehensive financial planning advice. Financial planners can use our results to better articulate the value of advice.

Keywords: personal financial planning, household finance, intertemporal choice, portfolio allocation, risk tolerance

JEL Classification: D12, D14, D81, D91, G11

Suggested Citation

Hanna, Sherman D. and Lindamood, Suzanne, Quantifying the Economic Benefits of Personal Financial Planning (July 18, 2010). Financial Services Review, Vol. 19, No. 2, 2010, Available at SSRN: https://ssrn.com/abstract=1888285

Sherman D. Hanna (Contact Author)

Ohio State University (OSU) ( email )

1787 Neil Avenue
Campbell 265D
Columbus, OH 43210
United States
614-292-4584 (Phone)

Suzanne Lindamood

Independent ( email )

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