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Demand for financial advice: Evidence from a randomized choice experiment

Author

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  • de Bruin, Boudewijn
  • Cherednychenko, Olha
  • Hermes, Niels
  • Kramer, Marc
  • Meyer, Marco

Abstract

How does the salience and structure of costs for financial advice influence consumer demand? This study conducts a randomized choice experiment exploring possible consequences of introducing a commission ban in the retail mortgage market. A sample of more than 2100 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 % 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.

Suggested Citation

  • de Bruin, Boudewijn & Cherednychenko, Olha & Hermes, Niels & Kramer, Marc & Meyer, Marco, 2024. "Demand for financial advice: Evidence from a randomized choice experiment," Journal of Banking & Finance, Elsevier, vol. 163(C).
    • Handle: RePEc:eee:jbfina:v:163:y:2024:i:c:s0378426624001109
    DOI: 10.1016/j.jbankfin.2024.107193
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    More about this item

    Keywords

    Financial advice; Salience; Financial sophistication; Present focus;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • G53 - Financial Economics - - Household Finance - - - Financial Literacy

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