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The perils of overconfidence: Why many consumers fail to seek advice when they really should

David R. Lewis ()
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David R. Lewis: Ryerson University

Journal of Financial Services Marketing, 2018, vol. 23, issue 2, 104-111

Abstract: Abstract Consumers regularly make decisions. Some of these decisions are relatively simple, such as a selecting a jam or a coffee, where the choice is entirely subjective. Others, such as investment decision-making, are risky, complex, consequential, and there is a normatively optimal choice. Seeking advice from an expert is a reasonable solution in these circumstances, and yet a minority of investors turn to a professional for advice. As an alternative to human advisors, technology is increasingly being harnessed to provide effective and low-cost advice to assist consumers in making decisions. In a retail context, these are shop bots and search engines often used on a mobile phone while shopping. In an investment context, these are frequently referred to as “robo-advisors”. Examining consumer intention to seek advice in an investment context, the current study demonstrates that, among numerous factors examined, unfounded confidence was the best indicator of consumer reluctance to seek advice. Robo-advisors, as artificial intelligence agents providing financial literacy instruction and impartial expert advice, may offer a solution.

Keywords: Advice; Consumer financial decision-making; Objective knowledge; Subjective knowledge; Confidence (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1057/s41264-018-0048-7

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