The Demand for Financial Planning Services

Abstract

Based on 1998 to 2007 Survey of Consumer Finances datasets the proportion of households reporting use of a financial planner increased from 21% in 1998 to 25% in 2007, with an estimated increase of almost five million households between 2004 and 2007. Multivariate analysis shows that the likelihood of using a financial planner is strongly related to risk tolerance, with those with low risk tolerance the least likely, and those with above average risk tolerance the most likely to use a financial planner, controlling for income, net worth, age, and other factors. Those with substantial risk tolerance have significantly lower likelihood of using a financial planner than those with above average risk tolerance. Black households are more likely but Hispanic and Other/Asian households are less likely than comparable White households to use a financial planner. The likelihood of using a financial planner increases with net worth for ranges above zero, but also increases as net worth decreases below zero.

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