Finanzforum - Panel Rounds 2,3 and 4 and Corresponding Projects

This project was a follow up of the project "Investor Characteristics and Long-Term Financial Decision Making".

Topic and Objectives

Datasets in the field of Household Finance are budding internationally and some permit new identification strategies to pin down causal relationships. Combining administrative data on household holdings and transactions with surveys on the same households is a new promising way. In an ideal setting, surveys are conducted repeatedly and can also be used to run Randomized Controlled Trials (RCTs) with panel clients. Our persistent efforts over the past five years have paid off and we launched a research platform (named "Finanzforum") together with a large European retail bank in November 2017. This platform combines responses of bank clients to quarterly questionnaires with administrative data of the bank. It allows researchers to conduct RCTs with bank clients as the platform can be combined with oTree experiments, video streams, and special product offers by the bank. We started to recruit clients to participate in the panel in July 2018 and the first two survey rounds took place in August and October 2018. The panel currently comprises 2,100 representative bank clients. The initial survey was composed of general questions regarding preferences, beliefs, trust, financial literacy, and the use of financial products. Some questions will be reoccurring in subsequent surveys. Importantly, survey data are combined with broad and deep historical (up to ten years) and concurrent administrative data the bank has on all sample clients. Of course, researchers obtain only pseudonymized data which are hosted on dedicated servers in a bank-certified data center. The rental cost for such servers is over 2,500 euros per month. A second major cost component is incentives for participants. We use amazon vouchers worth five euros per participant and survey round - adding up to some 10.000 euros per survey round. In accordance with the bank, the platform shall be in place for several years. We intend to run three to four rounds of surveys and RCTs on the platform each year and the platform shall be accessible for researchers outside the core project team in the future. The second survey round is devoted to savings behavior. The next round (end of 2018) will focus on stock market participation (see our SAFE project proposal 2018 - including video treatments and portfolio simulations). For 2019, we are planning at least three rounds. The first will investigate the demand for professional advice and will ask participants about their reasons to seek advice and their past interactions with advisors at various financial institutions. The second wave will be conducted in cooperation with experimental researchers from Innsbruck and Utrecht. We will re-use oTree experiments they had conducted with financial professionals on personal traits (cognitive skills, risk preferences) relevant to financial behavior. The third wave will focus on pension planning and pension savings/dissavings. In addition to quarterly surveys, Finanzforum will allow us to conduct ad-hoc questionnaires subsequent to exogenous shocks like market downturns or inflation hikes. In all instances, and due to the design of Finanzforum - we will observe financial transactions and account balances of surveyed/treated clients and several control groups before and after our interventions.

Key Findings

• We show that financial advisors offer more self-serving advice to female than to male clients, based on minutes from about 27,000 real-world advisory meetings.
• Women are more likely to obtain recommendations to purchase costly mutual funds produced by the bank's own asset manager and are less likely to obtain rebates on any sales commissions.
• Women (but not men) with higher financial aptitude reject recommendations more frequently than their less apt peers. Stereotyping is stronger for male advisors.

Policy Implications

• There is evidence of statistical discrimination by professional advisors between their female and male clients in the financial services industry. Advisors have incentives to sell high-free products, especially to less financially literate clients and they do not seem to update their beliefs on a preconceived literacy gap between men and women in their client meetings.