Financial Literacy and Pension Investment Decisions

Gallery, Natalie; Gallery, Gerry; Brown, Kerry A.; Furneaux, Craig; Palm, Chrisann T.

doi:10.1111/j.1468-0408.2011.00526.x

Cited by 70 publications

(82 citation statements)

References 9 publications

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“…Thus, individuals' risk aversion plays an important role in the financial asset's selection. However, some studies have raised concern over individuals' ability to make optimal investment decisions that match their risk-return preferences, which would lead to the successful maximization of retirement income (Gallery et al 2011).…”

Section: Retirement Planningmentioning

confidence: 99%

The Influence of Financial Literacy, Risk Aversion and Expectations on Retirement Planning and Portfolio Allocation in Malaysia

Mahdzan

Mohd‐Any

Chan³

2017

GADJAH MADA INT. J. BUS.

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Abstract:The two objectives of this paper are to examine the effect of financial literacy, risk aversion and expectations on retirement planning; and, to investigate the effect of these antecedents on the retirement portfolio allocation. Data was collected via a self-administered questionnaire from a sample of 270 working individuals in Kuala Lumpur, Malaysia. Logistic and ordered probit regressions were employed to analyse the first and second objective, respectively. The results from the logistic regression indicate that future expectations significantly influence the probability of planning for retirement. Meanwhile, individuals with higher financial literacy and lower risk aversion are more likely to hold risky assets in their retirement portfolios. Subsequently, two-sample t-test and one-way ANOVA tests were conducted to further examine the differences in financial literacy, risk aversion and expectations, across demographic subgroups. The study contributes to the literature by holistically incorporating the behavioural aspects that affect retirement planning and by exploring an uncharted issue of retirement planning-namely, the retirement portfolio allocation.

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Section: Retirement Planningmentioning

confidence: 99%

The Influence of Financial Literacy, Risk Aversion and Expectations on Retirement Planning and Portfolio Allocation in Malaysia

Mahdzan

Mohd‐Any

Chan³

2017

GADJAH MADA INT. J. BUS.

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“…Financial literacy is defined as 'the ability to make informed judgements and take effective decisions regarding the use and management of money' (Noctor, Stoney, & Stradling 1992, p. 4). Similar financial literacy definitions are used in prior research and relevant government reports (Gallery, Newton, & Palm 2011b). The following sections will provide the rationale for each of the hypothesised relationships in the framework.…”

Section: Determinants Of Financial Risk Tolerance: Trust Relationshimentioning

confidence: 99%

“…But consideration was given to a potential nested model with a direct path from Financial Literacy to Growth Asset Allocation (as evidenced in Gallery et al 2011a;Sachse et al 2012 (Zattoni et al 2012). …”

Section: Comparison With Other Nested Structural Modelsmentioning

confidence: 99%

The Influence of Financial Risk Tolerance on Investment Decision-Making in a Financial Advice Context

Nguyen¹,

Gallery²,

Newton³

2016

AABFJ

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Client risk tolerance is universally assessed in the advisory process to help financial advisers provide suitable advice that assists clients in their investment decision-making. Although there is a well-established literature on risk tolerance and decision-making, little is known about financial risk tolerance and its influence on investor decisions in the financial advice context. Thus, the purpose of this study is to examine this influence with a focus on the key expected risk tolerance determinants: client financial literacy, trust in the financial advice service, and relationship length with the service. A new theoretical model and related hypotheses were proposed and tested using survey data from financial adviser clients in Australia (N=538). Results revealed a positive relationship between client risk tolerance and investment decision-making. Further, client trust and relationship length with the service were found to be positively associated with client financial literacy and risk tolerance. These findings, which provide a more comprehensive understanding of how risk tolerance and its antecedents influence client decisions, have the potential to improve advice in the financial services industry. KeywordsRisk tolerance, individual investment decisions, client-adviser relationship, financial advice context, financial planning AbstractClient risk tolerance is universally assessed in the advisory process to help financial advisers provide suitable advice that assists clients in their investment decision-making. Although there is a well-established literature on risk tolerance and decision-making, little is known about financial risk tolerance and its influence on investor decisions in the financial advice context. Thus, the purpose of this study is to examine this influence with a focus on the key expected risk tolerance determinants: client financial literacy, trust in the financial advice service, and relationship length with the service. A new theoretical model and related hypotheses were proposed and tested using survey data from financial adviser clients in Australia (N=538). Results revealed a positive relationship between client risk tolerance and investment decisionmaking. Further, client trust and relationship length with the service were found to be positively associated with client financial literacy and risk tolerance. These findings, which provide a more comprehensive understanding of how risk tolerance and its antecedents influence client decisions, have the potential to improve advice in the financial services industry. JEL Classification: D14

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“…Firstly, financial literacy is financial knowledge regarding the ability to use different financial concepts and instruments (Gallery et al, 2011;Hung et al, 2009;Huston, 2010;Remund, 2010;OCDE, 2013). Other researchers defined financial literacy as the experience and confidence in financial actions of the individual (Orton, 2007;OECD, 2013), the sufficient knowledge and ability to make financial decisions (Remund, 2010;OCDE 2013), or people's attitude towards the use of financial instruments and their confidence in financial operations performed (Orton, 2007;Huston, 2010;Remund, 2010;OCDE, 2013).…”

Section: Actual and Perceived Financial Knowledgementioning

confidence: 99%

The effects of perceived and actual financial knowledge on regular personal savings: Case of Vietnam

Nguyen¹,

Rózsa²,

Belás³

et al. 2017

Journal of International Studies

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Abstract. The paper examines the factors, which affect decision-making on regular personal saving behaviour in the context of an emerging market in Vietnam. Focusing on financial literacy, the paper uses a combined measure of actual financial knowledge and a self-assessment of overall financial knowledge. The sample of the study consists of 240 commercial banks customers selected in 12 branches of four banks in Ho Chi Minh City. The questionnaire covers: (1) actual financial knowledge; (2) self-rating of financial knowledge; (3) financial risk tolerance; and (4) demographic characteristics of the respondents. The results of a logistic regression analysis show that perceived and actual financial literacy have separate effects on regular personal saving. Particularly, actual financial knowledge has a statistically significant positive relationship with regular personal saving with odds ratio higher than 6.5 times. However, perceived financial knowledge and financial risk tolerance factor are not statistically significant with regular personal saving. Finally, this paper offers evidence that the interaction variable, which is used to combine education level with their major study, has a statistically significant relationship with regular personal saving.

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Financial Literacy and Pension Investment Decisions

Cited by 70 publications

References 9 publications

The Influence of Financial Literacy, Risk Aversion and Expectations on Retirement Planning and Portfolio Allocation in Malaysia

The Influence of Financial Literacy, Risk Aversion and Expectations on Retirement Planning and Portfolio Allocation in Malaysia

The Influence of Financial Risk Tolerance on Investment Decision-Making in a Financial Advice Context

The effects of perceived and actual financial knowledge on regular personal savings: Case of Vietnam

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