IDEAS home Printed from https://ideas.repec.org/p/hal/wpaper/hal-04015599.html
   My bibliography  Save this paper

The need for data products in personal finance

Author

Listed:
  • Edouard Ribes

    (CERNA i3 - Centre d'économie industrielle i3 - Mines Paris - PSL (École nationale supérieure des mines de Paris) - PSL - Université Paris Sciences et Lettres - I3 - Institut interdisciplinaire de l’innovation - CNRS - Centre National de la Recherche Scientifique)

Abstract

Background context: Current societal challenges around healthcare, education and retirement require households to increasingly leverage personal finance instruments. To meet this trends the lending, insurance and investment industries need to become more efficient and affordable. Specific knowledge gap the work aims to fill: To date, the distribution chains of financial instruments remains costly and inefficient. To transform, the associated industries need to further leverage digital medias to accelerate products distribution and maintenance. Some of the benefits of digitalization have already been capture & depicted in the recent literature sitting at the frontier between personal finance and financial technologies. However the scope of those studies has so far been limited to the distribution of those instruments & there has been little discussion about the opportunities associated to the maintenance of financial contracts, notably through the structuration of data products/ warehouses. This is a gap this article aims to address. Methods used in the study: This paper leverage standard economic modeling techniques and option theory to describe the impact of digital medias and notably data products on the financial instruments brokerage system. It also leverages order of magnitude founds in the literature to perform a high level calibration of those models to one of the Big 5 European financial market, namely the French investment industry. Key findings: The proposed models show 3 stylized facts about data products when applied to the French investment industry. First, such a market can only support two data product suppliers. Second, it comes with a large asymmetry in prices (prices differ by a factor 2 or 4 between actors) and clients profiles between the two data suppliers. Third, the market is not completely efficient as its equilibrium results in about 35\% of the market not being equipped with a data products. Implications: Data products can yield a 10 to 20% productivity increase for independent financial advisors and brokers distributing financial instruments. Those gains will likely be passed in some form to households, thereby increasing the overall efficiency of the financial system and supporting households financial professionalization.

Suggested Citation

  • Edouard Ribes, 2023. "The need for data products in personal finance," Working Papers hal-04015599, HAL.
    • Handle: RePEc:hal:wpaper:hal-04015599
    Note: View the original document on HAL open archive server: https://hal.science/hal-04015599v1
    as

    Download full text from publisher

    File URL: https://hal.science/hal-04015599v1/document
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Tullio Jappelli & Franco Modigliani, 2006. "The Age–Saving Profile and the Life-Cycle Hypothesis," Chapters, in: Lawrence R. Klein (ed.), Long-run Growth and Short-run Stabilization, chapter 2, Edward Elgar Publishing.
    2. Evans, David S, 1987. "The Relationship between Firm Growth, Size, and Age: Estimates for 100 Manufacturing Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 567-581, June.
    3. Thomas Philippon, 2016. "The FinTech Opportunity," NBER Working Papers 22476, National Bureau of Economic Research, Inc.
    4. Jonathan Zinman, 2015. "Household Debt: Facts, Puzzles, Theories, and Policies," Annual Review of Economics, Annual Reviews, vol. 7(1), pages 251-276, August.
    5. Huggett, Mark & Ventura, Gustavo, 2000. "Understanding why high income households save more than low income households," Journal of Monetary Economics, Elsevier, vol. 45(2), pages 361-397, April.
    6. Luciano Fanti, 2015. "Growth, PAYG pension systems crisis and mandatory age of retirement," Economics Bulletin, AccessEcon, vol. 35(2), pages 1160-1167.
    7. Luciano Fanti & Luca Gori, 2012. "Fertility and PAYG pensions in the overlapping generations model," Journal of Population Economics, Springer;European Society for Population Economics, vol. 25(3), pages 955-961, July.
    8. Juhani T. Linnainmaa & Brian T. Melzer & Alessandro Previtero, 2021. "The Misguided Beliefs of Financial Advisors," Journal of Finance, American Finance Association, vol. 76(2), pages 587-621, April.
    9. Guillaume Bazot, 2018. "Financial Consumption and the Cost of Finance: Measuring Financial Efficiency in Europe (1950–2007)," Journal of the European Economic Association, European Economic Association, vol. 16(1), pages 123-160.
    10. Marc A. Ragin & Martin Halek, 2016. "Market Expectations Following Catastrophes: An Examination of Insurance Broker Returns," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 83(4), pages 849-876, December.
    11. Edouard Ribes, 2022. "Transforming personal finance thanks to artificial intelligence: myth or reality?," Working Papers hal-03862261, HAL.
    12. Stephen Foerster & Juhani T. Linnainmaa & Brian T. Melzer & Alessandro Previtero, 2017. "Retail Financial Advice: Does One Size Fit All?," Journal of Finance, American Finance Association, vol. 72(4), pages 1441-1482, August.
    13. Humphrey David & Willesson Magnus & Lindblom Ted & Bergendahl Göran, 2003. "What Does it Cost to Make a Payment?," Review of Network Economics, De Gruyter, vol. 2(2), pages 1-16, June.
    14. Edouard Augustin Ribes, 2021. "What is the impact of introducing productivity tools for wealth management professionals? A case study for the french market," Working Papers hal-03494465, HAL.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Edouard Ribes, 2022. "Transforming personal finance thanks to artificial intelligence: myth or reality?," Working Papers hal-03862261, HAL.
    2. Edouard Augustin Ribes, 2023. "Transforming personal finance thanks to artificial intelligence: myth or reality?," Financial Economics Letters, Anser Press, vol. 2(1), pages 11-12, April.
    3. Philippe d'Astous & Irina Gemmo & Pierre-Carl Michaud, 2022. "The Quality of Financial Advice: What Influences Client Recommendations?," Cahiers de recherche / Working Papers 9, Institut sur la retraite et l'épargne / Retirement and Savings Institute.
    4. Brunen, Ann-Christine & Laubach, Oliver, 2022. "Do sustainable consumers prefer socially responsible investments? A study among the users of robo advisors," Journal of Banking & Finance, Elsevier, vol. 136(C).
    5. Cruciani, Caterina & Gardenal, Gloria & Rigoni, Ugo, 2021. "Trust-formation processes in financial advisors: A structural equation model," The Quarterly Review of Economics and Finance, Elsevier, vol. 82(C), pages 185-199.
    6. Kling, Luisa & König-Kersting, Christian & Trautmann, Stefan T., 2023. "Investment preferences and risk perception: Financial agents versus clients," Journal of Banking & Finance, Elsevier, vol. 154(C).
    7. Edouard Ribes, 2022. "Using classification techniques to accelerate client discovery: a case study for wealth management services," Working Papers hal-03887759, HAL.
    8. Grant Alexander Wilson & Jason Jogia, 2024. "Examining personal financial advisors’ knowledge, client recommendations, and personal investments in private real estate and real estate investment trusts (REITs)," Journal of Financial Services Marketing, Palgrave Macmillan, vol. 29(3), pages 729-744, September.
    9. Cipriani, Giam Pietro & Pascucci, Francesco, 2020. "Pension policies in a model with endogenous fertility," Journal of Pension Economics and Finance, Cambridge University Press, vol. 19(1), pages 109-125, January.
    10. Edouard A. Ribes, 2022. "Financial planning and optimal retirement timing for physically intensive occupations," SN Business & Economics, Springer, vol. 2(8), pages 1-28, August.
    11. Olena Havrylchyk & Marianne Verdier, 2018. "The Financial Intermediation Role of the P2P Lending Platforms," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 60(1), pages 115-130, March.
    12. Eriksen, Kristoffer W. & Fest, Sebastian & Kvaløy, Ola & Dijk, Oege, 2022. "Fair advice," Journal of Banking & Finance, Elsevier, vol. 143(C).
    13. Nicole Jonker & Anneke Kosse, 2022. "The interplay of financial education, financial inclusion and financial stability and the role of Big Tech," Contemporary Economic Policy, Western Economic Association International, vol. 40(4), pages 612-635, October.
    14. Reher, Michael & Sokolinski, Stanislav, 2024. "Robo advisors and access to wealth management," Journal of Financial Economics, Elsevier, vol. 155(C).
    15. Bjarne Florentsen & Ulf Nielsson & Peter Raahauge & Jesper Rangvid, 2022. "How Important is Affiliation Between Mutual Funds and Distributors for Fund Flows? [Is unbiased financial advice to retail investors sufficient? Answers from a large field study]," Review of Finance, European Finance Association, vol. 26(4), pages 971-1009.
    16. Lucas A. Mariani & Jose Renato Haas Ornelas & Bernardo Ricca, 2023. "Banks’ Physical Footprint and Financial Technology Adoption," Working Papers Series 576, Central Bank of Brazil, Research Department.
    17. Barbara Liberda, 1999. "Household Saving in Poland," CASE Network Studies and Analyses 0187, CASE-Center for Social and Economic Research.
    18. Jorge Padilla, 2020. "Big Tech “banks”, financial stability and regulation," Revista de Estabilidad Financiera, Banco de España, issue Spring.
    19. Insoo Cho & Peter F. Orazem, 2021. "How endogenous risk preferences and sample selection affect analysis of firm survival," Small Business Economics, Springer, vol. 56(4), pages 1309-1332, April.
    20. John Y. Campbell, 2016. "Restoring Rational Choice: The Challenge of Consumer Financial Regulation," American Economic Review, American Economic Association, vol. 106(5), pages 1-30, May.

    More about this item

    Keywords

    Personal finance; households economics; wealth; technological change; financial services; The proposed models show 3 stylized facts about data;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:hal-04015599. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.