The relationship between financial planner use and holding a retirement saving goal: A propensity score matching analysis

Abstract

JEL codes: D12, D14It has been well established in the literature that financial advice leads to informed decision-making and improved financial outcomes. However, there is limited evidence regarding the link between financial planner use and attitudes toward retirement saving. As financial planners provide comprehensive advice for the long-term benefits of clients, their clients may become more aware of retirement saving as an important goal. We used data from the 2010 and 2013 Survey of Consumer Finances to examine the association between financial planner use and setting a retirement saving goal. We found that households who consulted a financial planner were more likely to report retirement as the motive for saving, even after we employed a propensity score matching technique to account for systematic differences between those who used and did not use financial planners. Our findings suggest that financial planners do help individuals achieve their long-term financial objectives by highlighting the importance of retirement planning. The use of other types of financial professionals was not positively associated with the likelihood of setting retirement as an important saving goal in our main model.

A Model for Personal Financial Planning Towards Retirement

“…Regarding the variables in T1, it is noteworthy that the most important source of influences to determine financial management behaviour seems to be attitudes. Accordingly to prior findings (Kim et al, 2018;, commitment to consulting evidenced a strong influence on financial management behaviour, that suggest that financial planners do help individuals achieve their retirement financial objectives by highlighting the importance of retirement planning, and they can improve the decision-making process (Engelmann et al, 2009;Kramer, 2012), and consequently individuals can get greater return on investments (Allie et al, 2016). Contrarily to the result of Marsden et al (2011), financial advisory in the present study was not related to retirement savings.…”

Financial attributes, financial behaviors,financial‐advisor‐usebeliefs, and investing characteristics associated with having used arobo‐advisor

“…Financial‐advisor use is generally associated with healthy financial behaviors (Kim, Pak, Shin, & Hanna, 2018; Marsden, Zick, & Mayer, 2011). Yet data indicate that many households do not engage in financial planning; for instance, a 2016 Northwestern Mutual study found that 68% of U.S. adults do not get professional financial advice—and, even among those who do, many feel as though their advisors are not long‐term partners (Northwestern, 2016).…”

Financial knowledge overconfidence and early withdrawals from retirement accounts

“…We found that financial knowledge overconfidence was strongly related to early withdrawals, even after controlling for income and other characteristics, which is a worrisome finding. As Kim, Pak, Shin, and Hanna (2018) concluded, advice from financial planners can assist individuals in achieving long‐term financial goals of retirement planning. Therefore, it is possible that consulting with financial planners could help individuals with low financial knowledge make more appropriate early withdrawal decisions.…”