Trust and Financial Advice

44 Pages Posted: 12 Jun 2016

See all articles by Jeremy Burke

Jeremy Burke

Center for Economic and Social Research (CESR)

Angela Hung

RAND Corporation - Labor and Population

Date Written: January 7, 2016

Abstract

Trust plays an important role in financial decision-making, particularly regarding financial advice. In fact, investors cite “trust” as the most important determinant in seeking a financial service professional for advice (Hung et al., 2010). In this paper, we explore the relationships between financial trust and behaviors, attitudes, knowledge and preferences related to utilizing professional financial advice. Using survey and experiment data from the RAND-USC American Life Panel, we find that financial trust is correlated with advice usage and likelihood of seeking advisory services. Analysis of the experiment shows that trust is an important predictor of who chooses to receive advice, even after controlling for demographic characteristics and financial literacy. However, providing unsolicited advice has little impact on behavior, even for individuals with high levels of trust.

Suggested Citation

Burke, Jeremy and Hung, Angela, Trust and Financial Advice (January 7, 2016). RAND Working Paper Series WR- 1075. Available at SSRN: https://ssrn.com/abstract=2794247 or http://dx.doi.org/10.2139/ssrn.2794247

Jeremy Burke (Contact Author)

Center for Economic and Social Research (CESR) ( email )

635 Downey Way
Los Angeles, CA 90089-3332
United States

Angela Hung

RAND Corporation - Labor and Population ( email )

United States

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