Financial Planners Research Articles

Aligning Tasks, Technology, People, and Structures to Leverage the Value of Big Data Analytics

This study provides an understanding of how task, technology, people and structures (TTPS) can be used by developing countries as a baseline for future alignment evaluations to leverage big data analytics (BDA) in healthcare. Enabling the adoption of patient-empowering technologies is being used to cultivate a more patient-centric and collaborative healthcare ecosystem. Creating simple and reliable technology then integrating it into the existing public healthcare infrastructure has generated new challenges for big data analytics. Challenges arise because of complex interactions among the tasks that need to be supported by the technology, people using the technology and the distinct contextual characteristics of the organization. Therefore, TTPS are organisational elements that affect the value generated by BDA. However, little is still known about how these interacting organizational elements can be aligned to obtain maximum BDA value. A study involving participants from different industrial sectors in South Africa was conducted to determine what level of alignment of TTPS yields the best value from BDA. We adopted the notion of alignment as Gestalts. Results show strong alignment between TTPS where IT experts work closely with financial planners. Adequate training, coupled with structures encouraging usage of BDA results in higher organisational performance when technology is in sync with the tasks.

Wealth inequality and the next-generation financial planners

Wealth inequality and the next-generation financial planners

The necessary and sufficient conditions for retirement funding adequacy: A fuzzy set analysis

Although retirement funding adequacy literature has explored perceptions of retirement preparations and savings targets, there remains a lack of understanding of which conditions are necessary and sufficient for it to occur. This study identifies the necessary and sufficient conditions for retirement funding adequacy by examining the extent to which demographic, psychological and behavioural variables predict its occurrence. Within the context of South Africa, fuzzy set qualitative comparative analysis was used to test a complex model and qualify the processes that lead to retirement funding adequacy. The results show that educated women of higher socio-economic status are associated with retirement provisions. Thus, the inclusion and empowerment of women in financial planning activities results in positive retirement outcomes. Furthermore, retirement provisions precede retirement funding adequacy, and financial knowledge is a necessary condition for both retirement provisions and retirement funding adequacy. This research is relevant for financial planners and institutions encouraging individuals to plan and save for retirement in order to reduce the retirement funding adequacy gap experienced by retirees.

Technology will Save Financial Advice

ABSTRACT Advice provided by financial planners has the potential to impact the financial and emotional well-being of clients and is particularly important in a world struggling to deal with COVID-19. Despite the outcomes of quality financial planning relationships, there is little direct evidence to support the importance of technology in the financial planning setting, Previous research has emphasised the importance of technology in other fields, although not in relation to financial planning. This research investigates the impact of technology on financial advice value, measured in a survey of clients and financial planners regarding factors of technology, communication, trust, and investment returns. A questionnaire was developed based on previously validated scales. Ratings for the factors were compared between clients and financial planners, with financial planners found to underestimate their client’s confidence in their process, and also underestimate the importance of communication to clients, The results indicate that clients value investment returns above the financial planning relationship, and that financial planners value the relationship above investment returns, This research contributes to the financial planning and technology literature, provides a foundation for future research, and provides support for the importance of communication and technology in professional relationships such as in financial planning.

Diversity in financial planning: Race, gender, and the likelihood to trust a financial planner

AbstractThis study used an experiment to investigate the association between race, gender, and trust as it relates to working with a financial planner among a sample of Black and White MTurk respondents. Results revealed neither a respondent nor a financial planner's race was related to the level of trustworthiness perceived by a respondent. However, respondents were more likely to trust women financial planners than men financial planners. In addition, women respondents were more likely than men respondents to trust financial planners. Implications of this study are important in understanding the challenges and opportunities faced by underrepresented populations in succeeding as a financial planner.

Herding and loss aversion in stock markets: mediating role of fear of missing out (FOMO) in retail investors

PurposeThe study aims to understand the impact of loss aversion and herding on investment decision of retail investors. The study further evaluates the mediating role of fear of missing out (FOMO) in retail investors on these relationships.Design/methodology/approachThe study employed questionnaire survey to collect data from retail investors of Indian stock market. Total 323 data were collected. The collected data were examined using SmartPLS. Factor analysis and partial least square structural equation modeling were employed for fulfilling the objectives of the study.FindingsThe results of the study revealed that investment decisions of retail investors are significantly influenced by loss aversion, herd behavior as well as FOMO. Assessing the impact of herd behavior and loss aversion on investment decision in presence and absence of FOMO exposed that FOMO partially mediates these relations. The mediation was complementary in nature as the presence of FOMO increased the influence of loss aversion and herd behavior on retail investor's investment decisions.Practical implicationsBehavioral predispositions are accountable for numerous irregularities in stock markets. Thus, it is quite substantial to realize the stimulus of these partialities on investment decisions. The outcomes of this study would help financial planners and investors to keep in mind the different ways their decision outcomes could be biased and try to ignore them.Originality/valueThough there have been many studies conducted on behavioral biases and their impact on investment decisions, there are very few studies that have taken into account the FOMO factor in investment, in context of the behavioral biases. Theoretically, FOMO has been linked with herd behavior and greed of earning more, but there are very few empirical supports to this fact. Thus, this study is an attempt to fill this gap by examining the role of FOMO on investment decisions and the different biases associated with it.

Offsetting Risk in a Neoliberal Environment: The Link between Asset-Based Welfare and NIMBYism

Affordable housing policy in the developed world has been undergoing a systematic commodification for several decades, including a push for homeownership as the normalized tenure and a commodity unto itself. Scholars suggest this push for homeownership is part and parcel of a neoliberal asset-based welfare to supplement, or even outright replace, traditionally defined benefit pension schemes. These policies individualize risk and re-fashion individual citizens as long-term financial planners, navigating the uncertainty inherent in international financial markets and general financial management. Less deeply explored, however, are the perverse incentives this system creates for homeowners to protect their home “investment” by leveraging planning policies, zoning, and land-use restrictions to preserve the community status quo and lock in the value of their home. In a policy environment in which long-term financial risk is individualized and public social welfare and pension systems are relegated to the smallest number of individuals possible, this type of NIMBYism (Not in My Backyard) is rather rational behavior, even as it simultaneously staunches the supply of new housing and drives up prices for non-homeowners. As such, this analysis synthesizes the existing research to make a formal theoretical connection between the neoliberal push for commodified housing, asset-based welfare, and the intractable political problem of NIMBYism.

Emerging adulthood milestones, perceived capability, and psychological well‐being while transitioning to adulthood: Evidence from a national study

AbstractUsing the 2017 wave of the transition to adulthood dataset, this study examined the association between the achievement of key milestone markers of adulthood and the well‐being of emerging adults between ages 18 and 28. Results indicate that relationship status, financial behavior, and perceived capability were positively associated with the well‐being of emerging adults. The results also indicate that financial responsibility, mediated by cohabiting relationship status, was negatively associated with relationship satisfaction and life satisfaction of emerging adults. All relationship categories were positively associated with well‐being when compared with the reference group of emerging adults who were single and not in a relationship. The study also found that being African Americans or other racial‐ethnic minority groups was negatively associated with life satisfaction, thus indicating a greater need for programs and policies to bridge the gap in perceived well‐being that currently exists between Non‐Hispanic Whites and other racial‐ethnic minority groups. Educational attainment was positively associated with the perceived well‐being of emerging adults. Implications of the key findings of this study are included for financial planners, scholars, and policymakers.

The role of recognition-based heuristics in investment management activities: are expert investors immune? – A systematic literature review

PurposeThe aim of this paper is to systematically review the literature published in recognized journals focused on recognition-based heuristics and their effect on investment management activities and to ascertain some substantial gaps related to them.Design/methodology/approachFor doing research synthesis, systematic literature review approach was applied considering research studies published within the time period, i.e. 1980–2020. This study attempted to accomplish a critical review of 59 studies out of 118 studies identified, which were published in reputable journals to synthesize the existing literature in the behavioural finance domain-related explicitly to recognition-based heuristics and their effect on investment management activities.FindingsThe survey and analysis suggest investors consistently rely on the recognition-based heuristic-driven biases when trading stocks, resulting in irrational decisions, and an investment strategy constructed by implementing the recognition-based heuristics, would not result in better returns to investors on a consistent basis. Institutional investors are less likely to be affected by these name-based behavioural biases in comparison to individual investors. However, under the context of ecological rationality, recognition-based heuristics work better and sometimes dominate the classical methods. The research scholars from the behavioural finance community have highlighted that recognition-based heuristics and their impact on investment management activities are high profile areas, needed to be explored further in the field of behavioural finance. The study of recognition-based heuristic-driven biases has been found to be insufficient in the context of emerging economies like Pakistan.Practical implicationsThe skilful understanding and knowledge of the recognition-based heuristic-driven biases will help the investors, financial institutions and policy-makers to overcome the adverse effect of these behavioural biases in the stock market. This article provides a detailed explanation of recognition-based heuristic-driven biases and their influence on investment management activities which could be very useful for finance practitioners’ such as investor who plays at the stock exchange, a portfolio manager, a financial strategist/advisor in an investment firm, a financial planner, an investment banker, a trader/ broker at the stock exchange or a financial analyst. But most importantly, the term also includes all those persons who manage corporate entities and are responsible for making its financial management strategies.Originality/valueCurrently, no recent study exists, which reviews and evaluates the empirical research on recognition-based heuristic-driven biases displayed by investors. The current study is original in discussing the role of recognition-based heuristic-driven biases in investment management activities by means of research synthesis. This paper is useful to researchers, academicians, and those working in the area of behavioural finance in understanding the role that recognition-based heuristics plays in investment management activities.

Antecedents to heuristics: decoding the role of herding and prospect theory for Indian millennial investors

PurposeThe purpose of this paper is to explore how heuristics are formed and whether herding and prospect theory act as antecedents to heuristics. The relationship is explored specifically for millennials.Design/methodology/approachThe proposed relationship is explored specifically for millennials. Herding and prospect theory are modelled as antecedents to heuristics. The study uses survey data from 923 millennials from India to test the model for two financial products: equity and mutual funds. Regression analysis is used to evaluate the model.FindingsFindings support the role of herding and prospect theory as antecedents to heuristics of millennials although to varying degrees for equity and mutual fund investments. The impact of herding on heuristics is likely to be smaller for equity investments as compared to mutual fund investments.Research limitations/implicationsThe findings provide insights into how heuristics are formed for millennials. The findings add to literature by beginning a new line of inquiry on how heuristics are formed. Since the model is tested on a single generation, future research can test the model on other generations. In addition, future research can also add more antecedents to our proposed model.Practical implicationsFindings from this study can provide financial planners and marketers with an understanding of how heuristics are formed for millennials. Financial planners can use these insights while providing financial advice to this generation and marketers can use them to create more relevant outreach.Social implicationsFinancial investments are an important conduit for financial security. By understanding the cognitive processes that influence financial investment decision-making, it is possible for educators to create content appropriately and for financial planners to advise clients accordingly to enable optimal financial decisions that will be wealth-creating.Originality/valueExisting literature primarily treats heuristics, herding and prospect theory as being independent of each other. The authors take a novel approach to model the antecedents to heuristics to be herding and prospect theory. The model is tested on millennials for two financial products: equity and mutual funds.

Evaluating the Evolution of the Personal Financial Planning Industry: Mutualism, Commensalism, or Parasitism?

The financial planning and advice industry has been experiencing healthy growth for the past five years and is expected to accelerate this growth following the Covid-19 pandemic (IBISWorld, 2021). The pandemic has led to higher equity yields and appreciating asset value, directly increasing the total value of assets under management (AUM) held by financial planners and advisors. The industry in the US alone has surpassed $52.9 billion in 2021. As the economy is expected to improve, this figure is expected to follow suit. Not included in these figures are the explosion of online personal finance bloggers and influencers. Some YouTube and TikTok videos have raked in billions of views regarding personal finance (Smith, 2021). Many of these online contents have benefitted viewers and prompted them to start making good decisions regarding their personal wealth, spreading financial literacy to the masses. However, poor financial advice may be spread out as easily to viewers. The Wall Street Journal has reported on this issue back in 2005 where blogs and magazines have been found to give both good and bad advice on budgeting, saving, and overall personal finance management (Cullen, 2005). Whatever the net effect of this phenomenon, the easy access through social media has amplified it. This article briefly journeys through the evolution of personal finance management and personal financial planning, including the new trends this industry is moving towards. Subsequently, this article will look into the risk and rewards of the current personal financial planning and advice industry, including certified financial planners and uncertified personnel (social media influencers, financial gurus), as to whether consumers are benefitting as a whole, or otherwise. A disclaimer to this research is that the findings and opinions towards the industry do not encompass all the service providers in the business as there are many other influencing factors such as business models, individual agenda, and unique circumstances of each provider and consumer. Keywords: Conflict of interest; financial planning; financial experts; Influencers; Personal finance

The effect of risk literacy and visual aids on portfolio choices among professional financial planners

Financial planners and their clients come together regularly to discuss financial decisions, which are inherently risky. Yet, financial planning research has not explored the impact of risk literacy (i.e., objective numeracy)—the ability to understand and interpret probabilistic trade-offs—and graph literacy on client-planner decision-making quality. This study uses an experimental design to test financial planners’ risk literacy and their ability to select the most resilient portfolio based on whether they were given probabilistic information and a visual representation or only probabilistic information. Results indicate that visual representation do help financial planners determine the appropriate choice, but risk literacy does not. Implications for financial planners and future research in this area are discussed.

Tanggung Jawab Perusahaan Perencana Keuangan Penyedia Program Investasi yang Merugikan Konsumen Dihubungkan dengan Teori Kepastian Hukum

The principle of responsibility as one of the principles of GCG is reflected in the Company Law that every company may not carry out activities that are contrary to the law. This responsibility principle is also applied to companies engaged in the capital market. Financial planning companies are companies whose activities are connected to the capital market and can support the capital market. However, the regulations regarding financial planners have not been specifically regulated in statutory provisions. The existence of a legal vacuum regarding financial planners is used as an opening to commit violations by one of the financial planning companies so that it results in losses for consumers. This study used a normative juridical approach using a descriptive analytical research specification. The data collection technique used is through literature study using laws, books, journals and the internet related to the topic of the problem which will later be used as a reference for solving problems as part of data analysis. The analytical method used legal construction through the analogy method which is used to find specific provisions that become general provisions so that they can be applied to financial planning companies. The conclusions obtained from this research are: First, the regulation regarding financial planners in Indonesian laws and regulations has not been specifically and specifically regulated so that the existence of financial planners has not received legal certainty. Second, responsibility for financial planning companies providing investment programs that harm consumers can be subject to administrative, civil and criminal sanctions.

Enumerating the value of financial advice in a competitive market

This paper introduces and examines a composite, dual fee structure (CDFS) for financial planners that helps quantify the value of financial advice. Our structure specifically separates financial plan- ning (advice) fees based on total net worth (NW) from Investment Management (IM) fees based on assets under management (AUM), which are readily observable and pervasive in the marketplace. Doing so facilitates quantifying the value of this financial advice in a competitive market setting. Knowing the financial value of the non-IM component of financial planning services can reduce per- ceived conflicts of interest by permitting financial planners to generate compensation for non-IM planning activities in a transparent manner, whether or not the client moves investable funds to the planner.

The professionalization of financial planning in Australia: an institutional logics perspective

PurposeThis paper researches the professionalization of financial planning in Australia. The authors investigate how the institutional logic of major institutions inhibits this occupation from moving toward a professional status.Design/methodology/approachThe study uses documentary analysis of government inquiries into Australian financial services from 1997 to 2017 to ascertain the various institutional logics relating to the professionalization of financial planning. The method involves generating ideas from the data and applying an institutional logic framework to make sense of impediments to the professionalization of financial planning in Australia.FindingsThe regulator adopted a self-regulation logic that empowered financial institutions to govern financial advice. These financial institutions have a logic of profit maximization that creates conflicts of interest in financial planning. The financial planning professional bodies adopted a logic of attracting and retaining members due to a competitive professional environment. Thus, financial planners have not been defined as fiduciaries, professional standards have not increased and an ineffective disciplinary resolution system exists.Research limitations/implicationsThis research illustrates the various institutional logics that need to be addressed to professionalize financial planning in Australia. However, the data used is limited to that drawn from the parliamentary inquiries.Originality/valuePrior research on the emergence of professions such as accounting has shown that financial institutions are sites of professionalization. This research shows that financial institutions impede professionalization in financial planning. Also, where the state granted legitimacy to other professions, this research indicates that the state regulator's logic of self-regulation has not legitimized financial planning.

Minding the Gap in Subjective Mortality Estimates

This article explores the accuracy of subjective life expectancy estimates using data primarily from the from the Health and Retirement Study (HRS). Although individuals appear to have some sense about their likelihood of survival (i.e., their subjective mortality), there are notable gaps in these estimates, consistent with past research. Evidence suggests that although subjective estimates may be relatively accurate, on average, and that households appear to do a relatively good job considering various objective factors (for example, health status), there are often significant errors in individual forecasts, and households do not appear to correctly consider all the relevant objective factors (such as income and smoking). Therefore, financial planners need to educate themselves on how to better model and personalize mortality assumptions into financial plans versus relying on purely subjective estimates to ensure that planning assumptions are as accurate as possible. <b>Key Findings</b> ▪ Errors in mortality forecasts can have a significant impact on a variety of household decisions, such as required savings, optimal retirement spending, etc. ▪ This analysis suggests that while individuals appear to have some sense of their mortality, there can be notable errors in these estimates and that a number of attributes are not appropriately considered when forecasting mortality. ▪ Given the clear gaps that exist in subjective mortality estimates, objective information should largely (or entirely) be the basis for any type of retirement period estimate in a financial plan.

Sequence Risk: Is It Really a Big Deal?

Financial planners are keenly aware of, and routinely warn clients about, sequence risk; that is, the possibility of facing a sequence of low returns early in retirement that may force retirees to scale down significantly the plans they had made. This really is a scary scenario, but one that the evidence here shows that retirees are not very likely to encounter. A new and refined definition of sequence risk is advanced in this article, linking this type of risk to the sustainability of a withdrawal strategy. Furthermore, three ways of assessing sequence risk are proposed, among them one that enables a retiree to monitor the sustainability of his withdrawal strategy periodically and to introduce adjustments when necessary. The ultimate message of this article is that retirees should be informed, but not obsess, about sequence risk. <b>Key Findings</b> ▪ Sequence risk, or the possibility of facing a sequence of low returns early in retirement that forces retirees to scale down their plans significantly, is a scary scenario. ▪ The evidence suggests that, however scary it might be, sequence risk is not very likely to hit retirees, who should certainly be informed, but not obsess about, this type of risk. ▪ Three ways of assessing sequence risk are proposed here, among them one that enables retirees to monitor the sustainability of a withdrawal strategy periodically and to introduce adjustments when necessary.

Future Care Planning: Concerns of Elderly Parents Caring for a Person With Serious Mental Illness.

Although recent advances in early treatment of people with serious mental illness have brought new hope to family members, parents of service users are still often left to worry about their loved one's future care. Without judicious planning, a parent''s death can be a catastrophic event that leaves an adult with serious mental illness without supports. This Open Forum emphasizes the benefits of mental health professionals being proactive and helping families and service users address concerns with future care planning. The active involvement of all stakeholders, including the person with mental illness, relatives, friends, mental health professionals, lawyers, and financial planners, can ensure proper care planning and promote better long-term outcomes.

Financial literacy and financial well-being of Australian consumers: a moderated mediation model of impulsivity and financial capability

PurposeThis study aims to test a moderated mediation model for a twofold purpose. First, to examine the mediating role of financial capability (FC) in the association between financial literacy (FL) and financial well-being (FW). Second, to analyze if non-impulsive future-oriented behavior (NIB) moderates the associations of FL with FC and FL with FW.Design/methodology/approachThe authors use the PROCESS macros in IBM SPSS Statistics to test the moderated mediation model and analyze the 2016 wave of the Household, Income and Labor Dynamics in Australia Survey.FindingsThe empirical analysis shows that FC partially mediates the association between FL and FW. Furthermore, the moderated mediation analysis shows that NIB strengthens the associations of FL with FC and FL with FW. Specifically, the positive associations of FL with FC and FL with FW significantly increase for those consumers who score high on NIB.Practical implicationsThe findings have implications for the financial services industry. Professional financial planners can positively improve the ability of consumers to deal with their financial matters by highlighting the importance of FL and NIB.Social implicationsThe study findings suggest educating consumers to discourage impulsive behavior and encourage them to create financial plans as it will enhance their ability to conduct financial tasks efficiently, improving their FW.Originality/valueTo the authors’ knowledge, this is the first study to assess a moderated mediation model, which examines the role of FC as a mediator variable and NIB as a moderator variable in the association between FL and FW.

Investment in financial literacy and financial advice-seeking: Substitutes or complements?

This paper studies the strategic relationship between investment in financial literacy and seeking advice from a financial planner. While the existing literature on this topic considers financial literacy as exogenously given, we propose a simple model in which it is endogenously determined through the consumer's investment in financial literacy. Our theoretical model suggests that in this case, investment in financial literacy and financial advice-seeking are substitutes. We test this hypothesis using data from the 2016 Survey of Consumer Finances. When using the propensity score matching method to control for self-selection bias, we find a significant negative relationship between the probability of seeking advice from a financial planner and investment in financial literacy. While these findings cannot be easily explained by existing models, this paper shows that endogenizing financial literacy reconciles the results.