Demand for Financial Advice: Evidence from a Randomized Choice Experiment

47 Pages Posted: 12 Mar 2024 Last revised: 24 May 2024

See all articles by Boudewijn de Bruin

Boudewijn de Bruin

University of Groningen, Faculties of Philosophy, and Economics and Business

Olha O. Cherednychenko

University of Groningen - Faculty of Law

Niels Hermes

University of Groningen - Faculty of Economics and Business

Marc Kramer

University of Groningen - Faculty of Economics and Business - Department of Economics, Econometrics & Finance

Marco Meyer

University of York

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

de Bruin, Boudewijn and Cherednychenko, Olha O. and Hermes, Niels and Kramer, Marc and Meyer, Marco, Demand for Financial Advice: Evidence from a Randomized Choice Experiment (March 12, 2024). University of Groningen Faculty of Law Research Paper No.7/2024, Available at SSRN: https://ssrn.com/abstract=4756355 or http://dx.doi.org/10.2139/ssrn.4756355

Boudewijn De Bruin

University of Groningen, Faculties of Philosophy, and Economics and Business ( email )

Nettelbosje 2
Groningen, 9747 AE
Netherlands

HOME PAGE: http://www.philos.rug.n/~debruin

Olha O. Cherednychenko

University of Groningen - Faculty of Law ( email )

9700 AS Groningen
Netherlands

Niels Hermes (Contact Author)

University of Groningen - Faculty of Economics and Business ( email )

Postbus 72
9700 AB Groningen
Netherlands

Marc Kramer

University of Groningen - Faculty of Economics and Business - Department of Economics, Econometrics & Finance ( email )

Postbus 72
9700 AB Groningen
Netherlands

Marco Meyer

University of York ( email )

Heslington
University of York
York, YO10 5DD
United Kingdom

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