Facing a Biased Adviser While Choosing a Retirement Plan. The Impact of Financial Literacy and Fair Disclosure.

Journal of Consumer Affairs, 2015 Forthcoming

47 Pages Posted: 10 Jul 2015

See all articles by Eyal Carmel

Eyal Carmel

Ben-Gurion University of the Negev

Dana Carmel

Ben-Gurion University of the Negev - Department of Psychology

David Leiser

Dept. of Psychology - Ben Gurion University of the Negev

Avia Spivak

Ben-Gurion University of the Negev - Department of Economics

Date Written: July 9, 2015

Abstract

Buying a retirement saving plan in Israel involves meeting with an agent whose interests may differ from those of his or her customers. The aim of the present study was to explore the effect of the advice given by the agent, along with that of two further factors: a fair disclosure statement regarding ‎the agent’s ‎conflict of interest, and the customer's degree of financial literacy. Two experiments conducted among undergraduate students in Israel showed that customers ‎mostly ‎follow the agent's recommendation, even against their best ‎interest, and despite the presence of a fair disclosure statement. Only participants with high financial literacy, who received a disclosure statement, did examine the alternatives closely and rejected the advice when the recommendation was damaging. We also ruled out the existence of a negative psychological reactance response to a disclosure statement that would work to the detriment of financially literate participants.

Keywords: Fair disclosure, pension, financial literacy, reactance, conflict of interest

JEL Classification: D18, D81,D82, G23

Suggested Citation

Carmel, Eyal and Carmel, Dana and Leiser, David and Spivak, Avia, Facing a Biased Adviser While Choosing a Retirement Plan. The Impact of Financial Literacy and Fair Disclosure. (July 9, 2015). Journal of Consumer Affairs, 2015 Forthcoming. Available at SSRN: https://ssrn.com/abstract=2628735

Eyal Carmel

Ben-Gurion University of the Negev ( email )

1 Ben-Gurion Blvd
Beer-Sheba 84105, 84105
Israel

Dana Carmel

Ben-Gurion University of the Negev - Department of Psychology ( email )

Beer-Sheva, 84105
Israel

David Leiser (Contact Author)

Dept. of Psychology - Ben Gurion University of the Negev ( email )

1 Ben-Gurion Blvd
Beer-Sheba 84105, 84105
Israel

HOME PAGE: http://www.bgu.ac.il/~dleiser

Avia Spivak

Ben-Gurion University of the Negev - Department of Economics ( email )

Beer-Sheva 84105
Israel

Register to save articles to
your library

Register

Paper statistics

Downloads
45
Abstract Views
387
PlumX Metrics