How Financial Literacy Shapes the Demand for Financial Advice at Older Ages

Abstract

We investigate how financial literacy shapes older Americans’ demand for financial advice. Using an experimental module fielded in the Health and Retirement Study, we show that financial literacy strongly improves the quality but not the quantity of financial advice sought. In particular, more financially literate people seek financial help from professionals. This effect is more pronounced among older people and those with more wealth and more complex financial positions. Our analysis result implies that financial literacy and financial advisory services are complementary with, rather than substitutes for, each other.

Keywords: financial advice, financial literacy, aging, money management, Health and Retirement Study

JEL Classification: D14, G11, G41, J26