How Cognitive Ability and Financial Literacy Shape the Demand for Financial Advice at Older Ages

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Wharton Pension Research Council Working Papers
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financial advice
cognitive ability
financial literacy
aging
financial management
Health and Retirement Study (HRS)
Economics
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Kim, Hugh Hoikwang
Maurer, Raimond
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We investigate how cognitive ability and financial literacy shape older Americans’ demand for financial advice. Using an experimental module at the Health and Retirement Study, we show that cognitive ability and financial literacy strongly improve the quality but not the quantity of financial advice sought: more financially literate and cognitively able seek financial help from professionals. They also utilize more ‘free’ financial advice that may entail potential conflicts of interest. Finally, among those not seeking financial advice, people with higher cognitive function tend to distrust financial advisors, leading them to avoid these services.

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2020-01-01
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Published in The Journal of the Economics of Aging Vol 20, October 2021, 100329 https://www.sciencedirect.com/science/article/pii/S2212828X21000220
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