Investment Competence and Advice Seeking

Journal of Behavioral and Experimental Finance (2015) 6, 27-41

39 Pages Posted: 27 Jul 2014 Last revised: 3 Nov 2016

See all articles by Kremena Bachmann

Kremena Bachmann

University of Zurich - Department of Banking and Finance; Zurich University of Applied Sciences

Thorsten Hens

University of Zurich - Department of Banking and Finance; Norwegian School of Economics and Business Administration (NHH); Swiss Finance Institute

Date Written: July 25, 2014

Abstract

This study evaluates individuals’ abilities to avoid investment mistakes driven by behavioral biases and analyzes the relationship between investment competence and the propensity to seek or rely on professional advice. We use novel survey data collected from a representative sample of Swiss households. We find that − even after controlling for socio-economic and demographic characteristics − investment competence is positively related to demand for financial advice. It appears that investors who are at the highest risk of making investment mistakes are those who are the least likely to seek help from professional advisors. Therefore, supply-side solutions imposed by regulators to protect financial customers may not benefit those who need them most.

Keywords: financial literacy, behavioral biases, demand for financial advice, household finance

JEL Classification: D14, D83, G11, G23

Suggested Citation

Bachmann, Kremena and Hens, Thorsten, Investment Competence and Advice Seeking (July 25, 2014). Journal of Behavioral and Experimental Finance (2015) 6, 27-41, Available at SSRN: https://ssrn.com/abstract=2401565 or http://dx.doi.org/10.2139/ssrn.2401565

Kremena Bachmann (Contact Author)

University of Zurich - Department of Banking and Finance ( email )

Plattenstrasse 32
CH-8032 Zurich, Zurich 8032
Switzerland

Zurich University of Applied Sciences ( email )

Institut fuer Angewandte Medienwissenschaft
Zur Kesselschmiede 35
Winterthur, CH 8401
Switzerland

Thorsten Hens

University of Zurich - Department of Banking and Finance ( email )

Plattenstrasse 32
Zurich, 8032
Switzerland
+41-44 634 37 06 (Phone)

Norwegian School of Economics and Business Administration (NHH)

Helleveien 30
Bergen, 5045
Norway

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

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