How Cognitive Ability and Financial Literacy Shape the Demand for Financial Advice at Older Ages

20 Pages Posted: 15 Apr 2019

See all articles by Hugh Hoikwang Kim

Hugh Hoikwang Kim

University of South Carolina, Darla Moore School of Business

Raimond Maurer

Goethe University Frankfurt - Finance Department

Olivia S. Mitchell

University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER)

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Date Written: April 2019

Abstract

We investigate how cognitive ability and financial literacy shape older Americans’ demand for financial advice using an experimental module in the 2016 Health and Retirement Study. We show that cognitive ability and financial literacy strongly improve the quality, but not the quantity, of financial advice sought. Most importantly, the financially literate and more cognitively able tend to seek financial help from professionals rather than family members, and they are less likely to accept so-called ‘free’ financial advice that may entail conflicts of interest. Nevertheless, those with higher cognitive function also tend to distrust financial advisors, leading them to eschew their services.

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Suggested Citation

Kim, Hugh Hoikwang and Maurer, Raimond and Mitchell, Olivia S., How Cognitive Ability and Financial Literacy Shape the Demand for Financial Advice at Older Ages (April 2019). NBER Working Paper No. w25750. Available at SSRN: https://ssrn.com/abstract=3372054

Hugh Hoikwang Kim (Contact Author)

University of South Carolina, Darla Moore School of Business ( email )

1014 Greene Street
Columbia, SC 29208
United States

Raimond Maurer

Goethe University Frankfurt - Finance Department ( email )

Grüneburgplatz 1
House of Finance
Frankfurt, 60323
Germany

Olivia S. Mitchell

University of Pennsylvania - The Wharton School ( email )

Philadelphia, PA 19104-6365
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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