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The Value of Financial Advice

Author

Listed:
  • Claude Montmarquette

    (CIRANO and Universite de Montreal)

  • Nathalie Viennot-Briot

    (CIRANO)

Abstract

The research paper uses econometric modelling and a unique sample of Canadian households to study if having a financial advisor contributes pos- itively and significantly to the accumulation of financial wealth. It provides important insights on how the process of advised wealth creation actually works. In particular, the research paper provides new evidence that: i) having a financial advisor for at least four years has a positive and significant impact on financial assets after factoring out the impact of close to 50 socio-economic, demographic and attitudinal variables that also affect individual financial as- sets; ii) the positive effect of advice on wealth creation cannot be explained by asset performance alone: the greater savings discipline acquired through advice plays the major role.

Suggested Citation

  • Claude Montmarquette & Nathalie Viennot-Briot, 2015. "The Value of Financial Advice," Annals of Economics and Finance, Society for AEF, vol. 16(1), pages 69-94, May.
    • Handle: RePEc:cuf:journl:y:2015:v:16:i:1:montmarquette
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    File URL: http://down.aefweb.net/AefArticles/aef160104Montmarquette.pdf
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    References listed on IDEAS

    as
    1. Lusardi, Annamaria & Mitchell, Olivia S., 2007. "Baby Boomer retirement security: The roles of planning, financial literacy, and housing wealth," Journal of Monetary Economics, Elsevier, vol. 54(1), pages 205-224, January.
    2. Angela A. Hung & Joanne K. Yoong, 2010. "Asking for Help Survey And Experimental Evidence on Financial Advice and Behavior Change," Working Papers WR-714-1, RAND Corporation.
    3. Hackethal, Andreas & Haliassos, Michael & Jappelli, Tullio, 2012. "Financial advisors: A case of babysitters?," Journal of Banking & Finance, Elsevier, vol. 36(2), pages 509-524.
    4. Angela A. Hung & Joanne Yoong, 2010. "Asking for Help: Survey And Experimental Evidence on Financial Advice And Behavior Change," Working Papers 714-1, RAND Corporation.
    5. Shapira, Zur & Venezia, Itzhak, 2001. "Patterns of behavior of professionally managed and independent investors," Journal of Banking & Finance, Elsevier, vol. 25(8), pages 1573-1587, August.
    6. Brad M. Barber & Terrance Odean, 2000. "Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors," Journal of Finance, American Finance Association, vol. 55(2), pages 773-806, April.
    7. Daniel Bergstresser & John M. R. Chalmers & Peter Tufano, 2009. "Assessing the Costs and Benefits of Brokers in the Mutual Fund Industry," The Review of Financial Studies, Society for Financial Studies, vol. 22(10), pages 4129-4156, October.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Guo, Fusen & Li, Feng & Lu, Xiaomeng, 2024. "Does financial advisors improve portfolio efficiency for individual investors? Evidence from large-scale microdata," International Review of Economics & Finance, Elsevier, vol. 91(C), pages 400-412.
    2. Kirsten L. MacDonald & Ellana Loy & Mark Brimble & Karen Wildman, 2023. "The value of personal professional financial advice to clients: A systematic quantitative literature review," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(4), pages 4399-4429, December.
    3. Claude Montmarquette & Nathalie Viennot-Briot, 2019. "The Gamma Factors and the Value of Financial Advice," Annals of Economics and Finance, Society for AEF, vol. 20(1), pages 387-411, May.
    4. Amaral, Christopher & Kolsarici, Ceren, 2020. "The financial advice puzzle: The role of consumer heterogeneity in the advisor choice," Journal of Retailing and Consumer Services, Elsevier, vol. 54(C).
    5. Hermansson, Cecilia & Song, Han-Suck, 2016. "Financial advisory services meetings and their impact on saving behavior – A difference-in-difference analysis," Journal of Retailing and Consumer Services, Elsevier, vol. 30(C), pages 131-139.

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    More about this item

    Keywords

    Value of advice; Econometric models;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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