The effect of risk literacy and visual aids on portfolio choices among professional financial planners

Authors

  • Meghaan R. Lurtz Department of Personal Financial Planning, Kansas State University
  • Michael G. Kothakota Department of Personal Financial Planning, Kansas State University
  • Stuart J. Heckman Department of Personal Financial Planning, Kansas State University
  • Kristy Archuleta Department of Financial Planning, Housing & Consumer Economics, University of Georgia

DOI:

https://doi.org/10.61190/fsr.v29i3.3457

Keywords:

Experimental design, Client communication, Decision-making, Risk literacy, Financial planners

Abstract

Financial planners and their clients come together regularly to discuss financial decisions, which are inherently risky. Yet, financial planning research has not explored the impact of risk literacy (i.e., objective numeracy)—the ability to understand and interpret probabilistic trade-offs—and graph literacy on client-planner decision-making quality. This study uses an experimental design to test financial planners’ risk literacy and their ability to select the most resilient portfolio based on whether they were given probabilistic information and a visual representation or only probabilistic information. Results indicate that visual representation do help financial planners determine the appropriate choice, but risk literacy does not. Implications for financial planners and future research in this area are discussed.

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Published

2021-09-30

How to Cite

Lurtz, M. R., Kothakota, M. G., Heckman, S. J., & Archuleta, K. (2021). The effect of risk literacy and visual aids on portfolio choices among professional financial planners. Financial Services Review, 29(3), 209–225. https://doi.org/10.61190/fsr.v29i3.3457

Issue

Vol. 29 No. 3 (2021): Fall 2021

Section

New Original Submission

License

Copyright (c) 2021 Academy of Financial Services

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