The Decision to Seek Advice in the Self-Directed Retirement Fund Industry

29 Pages Posted: 18 Jan 2017

See all articles by George Mihaylov

George Mihaylov

University of Adelaide

Alfred Yawson

University of Adelaide; Financial Research Network (FIRN)

Ralf Zurbruegg

University of Adelaide; Financial Research Network (FIRN)

Date Written: 2015

Abstract

This article examines the influence of investor knowledge and the cognitive bias which arises from overconfidence on the advice seeking behaviour of investors managing their own retirement funds. Specifically, we trace whether overestimating one’s own technical and financial abilities can hinder the willingness to seek advice, particularly when it would be in the investors’ best interest to do so. We identify a subset of investors who are not knowledgeable and yet do not seek advice. These investors exhibit overconfidence in their ability to manage a fund, despite holding under-diversified and less sophisticated portfolios relative to their peers. Given the global rise in investors choosing to manage their own retirement funds and the importance of seeking advice in this context, there are direct policy implications from these results. They suggest a need to identify and target investors who display overconfidence since they are most likely to be managing under-performing retirement investments in the longer term.

Keywords: overconfidence, literacy, pension plan, financial advice, investment decision

JEL Classification: D14, G11, J32

Suggested Citation

Mihaylov, George and Yawson, Alfred and Zurbruegg, Ralf, The Decision to Seek Advice in the Self-Directed Retirement Fund Industry (2015). Applied Economics, Vol. 47, No. 32, 2015, Available at SSRN: https://ssrn.com/abstract=2900747

George Mihaylov (Contact Author)

University of Adelaide ( email )

233 North Terrace
Department of Finance
Adelaide, SA 5005
Australia
+61 8 8313 2056 (Phone)

HOME PAGE: http://www.adelaide.edu.au/directory/george.mihaylov

Alfred Yawson

University of Adelaide ( email )

No 233 North Terrace
Adelaide, South Australia 5005
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Ralf Zurbruegg

University of Adelaide ( email )

233 North Terrace
Department of Finance
Adelaide SA 5005
Australia
+61 8 8303 5535 (Phone)
+61 8 8303 4368 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

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