Self-Awareness, Financial Advice and Retirement Savings Decisions
48 Pages Posted: 23 Aug 2017 Last revised: 9 Dec 2017
Date Written: December 8, 2017
Using a financial literacy survey of Swedish pension investors matched to actual retirement savings decisions, we argue that respondents can be broken into three groups: those who are financially literate, those who mistakenly believe they are financially literate, and those who know that they are not. Investors with mistaken beliefs are more likely to work with mass-market advisors who steer them into high-fee funds. They underperform as a result. By comparison, those who either possess financial literacy or else understand that they do not possess financial literacy avoid advisors, stay with the low-cost default fund, and therefore accumulate retirement savings more quickly.
Keywords: Pensions, financial advisors, financial literacy, overconfidence
JEL Classification: G18, D18
Suggested Citation: Suggested Citation