Financial Literacy and the Demand for Financial Advice

46 Pages Posted: 4 Oct 2013 Last revised: 21 Oct 2018

See all articles by Riccardo Calcagno

Riccardo Calcagno

Politecnico di Torino

Chiara Monticone

Organization for Economic Co-Operation and Development (OECD)

Date Written: February 11, 2013

Abstract

The low level of financial literacy across households suggests they are at risk of taking sub-optimal financial decisions. In this paper we assess to what extent financial advisors can substitute for low financial knowledge. We analyze the effect of investors' financial literacy on their demand of professional, non-independent advice. Using the 2007 Unicredit Customers' Survey we find that non-independent advisors are not sufficient to alleviate the problem of low financial literacy. Investors with a low level of financial literacy are less likely to consult with an advisor, while they delegate their portfolio choice more often or do not invest in risky assets. We explain this evidence with a highly stylized model of strategic interaction between investors and better informed advisors facing conflicts of interests. Advisors reveal information only to the more knowledgeable investors, who anticipating this are then more likely to consult with them.

Keywords: financial literacy, financial advice

Suggested Citation

Calcagno, Riccardo and Monticone, Chiara, Financial Literacy and the Demand for Financial Advice (February 11, 2013). Journal of Banking and Finance, Vol. 50, 2015, Available at SSRN: https://ssrn.com/abstract=2336061 or http://dx.doi.org/10.2139/ssrn.2336061

Riccardo Calcagno (Contact Author)

Politecnico di Torino ( email )

Corso Duca degli Abruzzi, 24
Torino, Torino 10129
Italy

Chiara Monticone

Organization for Economic Co-Operation and Development (OECD)

2 rue Andre Pascal
Paris Cedex 16, 75775
France

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