Demand for Financial Advice: Evidence from a Randomized Choice Experiment
47 Pages Posted: 12 Mar 2024 Last revised: 24 May 2024
Date Written: March 12, 2024
Abstract
To determine whether and to what extent the salience of the costs charged for financial advice influences demand for such services, this study relies on a randomized choice experiment, pertaining to the consequences of introducing a commission ban in the context of the retail market for mortgages. A sample of more than 2,100 participants of the Dutch Household Survey panel reveals that in a fee-based regime, in which the costs of advice are salient and must be paid upfront, demand for advice decreases by 25 percent compared with a situation in which the same costs are embedded in mortgage payments. We do not find evidence that such demand effects for financial advice varies across less versus more sophisticated customers. At the same time, we do find that customers with a stronger focus on the present express less willingness to pay for advice upfront.
Keywords: financial advice, salience, financial sophistication, present focus
JEL Classification: D14, D91, G28, G41, G51, G53
Suggested Citation: Suggested Citation