Keep your customer knowledgeable: financial advisors as educators

Abstract

Educational programmes aimed at increasing financial literacy are typically scarcely effective or have relatively quick ‘decay’ periods. In this paper, I provide evidence that financial advisors are an effective way to increase investors’ financial awareness. I check this relationship using three measures of financial literacy: basic, advanced and overall; and also test different typologies of advisors. Results indicate that financial advisors have a significant educational role; in particular, the presence of independent financial advisors tends to increase the ‘advanced’ financial literacy of their clients. The study has potentially important policy implications, as it provides robust evidence that investors’ financial literacy can be increased in a gradual and stable way that does not directly affect public funds.

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