To Seek or not to Seek Financial Advice: A

Transcript:To Seek or not to Seek Financial Advice: A:
To Seek or not to Seek Financial Advice: A Synthesis of International Evidence Bersant Hobdari, Associate Professor bh.int@cbs.dk March 22, 2017 Agenda Financial advice industry Motivation and approach of this study Models of financial advice – how financial advice is expected to create value Findings Implications Financial Advice Industry The size of global financial advisory market has been steadily increasing. Data from 2011 to 2016 show that the global financial advisory market grew from 54.9 billion U.S. dollars in 2011 to 70.4 billion in 2016, an increase of about 27%. The size of financial advice industry is difficult to estimate, in part because of its diversity. In the US, the Bureau of Labor Statistics reports that 208,400 individuals were employed as financial advisers in 2008, a number expected to increase to 271,200 (30% increase) by 2018. Limited public Nordic Numbers – so far Motivation and Approach of this Study I Demand for financial advice is a global phenomenon but frequently also highly disputed. In general, individual (retail) investor demand for the following forms of financial advice has been steadily increasing: (1) debt advice (2) investment advice (3) loan advice (4) insurance advice and (5) tax advice. Motivation and Approach of this Study II Industry participants routinely claim that advice contributes by, among other things, improving savings and investment behaviors, selecting appropriate financial products, optimizing asset mix for personal circumstances, etc. Public opinion surveys commissioned by the financial services industry consistently observe that those who seek advice are also those who are financially better off on several dimensions. Motivation and Approach of this Study III Not surprisingly, the impact, or value, of advice has drawn considerable attention, academic interest included. There are however numerous challenges to overcome when investigating a seemingly complex set of interrelated processes. Among these challenges is the type and volume of reliable data required to measure the various values or impacts of advice which is difficult to obtain. This challenge is reflected in the academic literature, which is relatively scarce but steadily growing. Giving that the field is reaching a stage of maturity, in this study, I review the existing academic literature on the impact, or value, of financial advice to individual investors. Only few Nordic studies Geographical Representation In total 52 studies over 15 years Models of Financial Advice The literature identifies four types of financial advice providers: A. technical experts B. transactional agents C. counselors