Financial advice and trust

Abstract

This article exploits new questions in the National Financial Capability Study to examine the determinants of trust in financial professionals and the impact of trust on the use of five types of financial advice. We find that trust declines with age and increases with willingness to take investment risk. Having some financial literacy increases trust, but having too much decreases it. Controlling for financial exposure, trust and cost are the two most important determinants of financial advice-seeking behavior. Saving advice is most affected with use increasing from 17% for the least trusting group to 44% for the most trusting group. © 2012 Academy of Financial Services. All rights reserved.