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Facing a Biased Adviser While Choosing a Retirement Plan: The Impact of Financial Literacy and Fair Disclosure

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Listed:
  • Eyal Carmel
  • Dana Carmel
  • David Leiser
  • Avia Spivak

Abstract

type="main" xml:id="joca12083-abs-0001"> Buying a retirement saving plan in Israel involves meeting with an agent whose interests may differ from those of his or her customers. The aim of the present study was to explore the effect of the advice given by the agent, along with that of two further factors: a fair disclosure statement regarding the agent's conflict of interest, and the customer's degree of financial literacy. Two experiments conducted among undergraduate students in Israel showed that customers mostly follow the agent's recommendation, even against their best interest, and despite the presence of a fair disclosure statement. Only participants with high financial literacy, who received a disclosure statement, did examine the alternatives closely and rejected the advice when the recommendation was damaging. We also ruled out the existence of a negative psychological reactance response to a disclosure statement that would work to the detriment of financially literate participants.

Suggested Citation

  • Eyal Carmel & Dana Carmel & David Leiser & Avia Spivak, 2015. "Facing a Biased Adviser While Choosing a Retirement Plan: The Impact of Financial Literacy and Fair Disclosure," Journal of Consumer Affairs, Wiley Blackwell, vol. 49(3), pages 576-595, November.
    • Handle: RePEc:bla:jconsa:v:49:y:2015:i:3:p:576-595
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    References listed on IDEAS

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