Financial Services Review (FSR) is the official publication of the Academy of Financial Services. FSR is a double-blind peer-reviewed Diamond Open Access Journal, which means there are no fees or restrictions for access to or submission of research, and no Article Processing Fees if published. As a Diamond Open Access journal, all FSR content is freely available without charge to users and their institutions. Users are allowed to read, download, copy, distribute, print, search, or link to the full texts of the articles, or use them for any other lawful purpose, without asking prior permission from the publisher or the author. This is in accordance with the BOAI definition of open access. The purpose of this double-blind, peer-reviewed academic journal is to encourage research that examines the impact of financial issues on individuals and households. In contrast to the many corporate or institutional finance journals, this journal focuses on individual financial management. Published research also reaches practising financial planners through accredited Continuing Education, giving authors a documented pathway from publication into professional practice. FSR’s acceptance rate is approximately 11%. Early Access: FSR publishes accepted articles online as soon as production is complete, making them immediately available with a DOI and fully citable prior to assignment to a regular issue. Financial Services Review, as an open-access, peer-reviewed academic journal, is indexed by a number of organizations, including: Chartered Association of Business Schools (CABS) Academic Journal Guide ABDC Journal Quality List - Australian Business Deans Council Cabells Scholarly Analytics Scopus Exaly Journal Analytics
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Sequence-of-Returns Risk Revisited: Can Time-Series Foundation Models Detect Danger Zones?
Sequence-of-returns risk (SoRR) is the dominant driver of retirement portfolio failure, yet planning practice relies on static probability-of-ruin estimates rather than prospective early-warning signals. This study tests whether a time-series foundation model (TSFM)—Amazon's Chronos—can detect SoRR danger zones, benchmarked against five traditional volatility indicators. Using 395 months of U.S. data (1993–2025) with actual inflation and a real-bond series, we construct danger-zone labels from 15-year, 4% real-withdrawal retirement simulations and evaluate each indicator's detection accuracy and retirement-outcome impact under a defensive-response strategy. As a danger-zone detector, Chronos forecasts are almost perfectly inverted: a naive reading (low forecast as danger) yields an ROC-AUC of 0.022, while reading it contrarily (high forecast as danger) yields 0.978, exceeding every traditional indicator (VIX = 0.654; composite = 0.678). The model's optimism is itself the warning. However, this near-perfect ranking power does not translate into an actionable real-time trigger: an expanding-window contrarian rule fires too rarely to protect portfolios, and both Chronos-based defensive strategies reduce worst-case wealth. Traditional indicators improve point-estimate worst-case (5th-percentile) terminal wealth by 13–51%, but moving-block-bootstrap confidence intervals include zero in every case, so the benefit is not statistically distinguishable from chance. The contribution is a corrected interpretation of TSFM output in financial planning, a rigorously benchmarked comparison, and candid guidance for practitioners on both the promise and the limits of foundation models for retirement risk.
Copyright (c) 2026 Harry Vadalkar https://creativecommons.org/licenses/by-nc/4.0
Does the Form of Retirement Wealth Matter for Spending? Evidence from HRS/CAMS
This study examines whether holding retirement wealth as annuitized income streams or liquid account-based balances is associated with household consumption among older retirees. Using the RAND Health and Retirement Study Longitudinal survey merged with the RAND Consumption and Activities Survey, the analysis focuses on retired and partly retired respondents aged 65 and older with household consumption data and retirement resources. In weighted pooled regressions with respondent-clustered standard errors, both wealth forms are positively associated with consumption, but the association is significantly larger for liquid account wealth. Holding total measured resources constant, a higher annuitized share is associated with lower consumption. However, person fixed-effects models reduce both wealth associations to statistical insignificance, suggesting that the finding primarily reflects differences across households rather than changes within households over time. The findings offer measured support for a liquidity-and-accessibility view of retirement spending while cautioning that cross-sectional wealth-composition patterns should not be interpreted as causal. Implications for retirement-income and decumulation planning are discussed.
Copyright (c) 2026 Christopher Reddick https://creativecommons.org/licenses/by-nc/4.0
Financial Education and Financial Health: The Mediating Role of Financial Knowledge
This study analyzed how financial education impacts financial health, a composite score based on spending, saving, borrowing, and planning behaviors, and how financial knowledge mediates this relationship. Data from the National Financial Capability Study waves of FINRA Foundation in 2015, 2018, and 2021 revealed generally positive financial health among respondents with significant differences in demographic groups. In addition, financial health among groups with or without financial education in the past is significantly different, with higher scores for individuals having financial education. Propensity scores matching analysis further confirmed a positive association between financial education and financial health scores (on average, 0.017 points higher for groups with financial education). Objective and subjective financial knowledge both partially mediated this relationship, respectively, in both traditional and causal mediation analyses. The full regression models, including financial education, financial knowledge, and demographic controls, explained 34 to 37% of the variation in financial health. While individual effects are small, there is practical value in understanding the directional influence of indicators, which also provide guidance on areas to focus on for financial planners, counselors, and educators.
Copyright (c) 2026 Van Dinh, Sonya Lutter https://creativecommons.org/licenses/by-nc/4.0
A Rose by Any Other Name: The impact of consumer perceptions of Buy Now Pay Later on BNPL use by young adults
This paper examines the relationship between consumers' perceptions of Buy Now Pay Later (BNPL) products and their subsequent usage patterns. Based on the literature on consumer perceptions, marketing strategies and financial product promotions, this study employs dual information processing theory as a lens for understanding how perceptions drive adoption and use of BNPL services. We employ ordered logistic regressions to analyse responses from a survey of young consumers aged 18-34 in New Zealand conducted by Qualtrics to assess the impact of consumer perceptions of BNPL across multiple aspects on frequency of use, whether consumers borrow to repay BNPL, and frequency of incurring late fees. The main findings suggest that marketing strategies significantly influence consumers' perceptions of BNPL, which in turn significantly affects their usage behaviour. Specifically, consumer acceptance of the attractive features of BNPL appears to mask the financial risks involved, relating to greater use and use consistent with impulse purchasing and possible subsequent debt accumulation.
Copyright (c) 2026 Qian Wang, Aaron Gilbert, Sommer Kapitan, Ayesha Scott https://creativecommons.org/licenses/by-nc/4.0
Financial Management Behavior Scale: A Re-Conceptualization for Emerging Markets
Understanding financial management behavior (FMB) is critical for improving individual well-being. Guided by the psychological and cultural dimensions of economic behavior, this study adapts and validates a simple yet comprehensive FMB scale in the context of a developing economy. Specifically, the study adapts and validates the Financial Management Behavior Scale developed by Dew and Xiao (2011) for the Indian context. Using a sequential exploratory design, the qualitative phase culturally contextualizes and refines the scale items, while the quantitative phase reassesses the factor structure and establishes reliability, structural validity, and criterion validity. Data were collected using purposive maximum-variation sampling to ensure socio-demographic heterogeneity appropriate for scale validation. The scale comprises two distinct factors based on temporal and cultural orientations of human behavior: short-term and long-term FMB. The scale captures an exhaustive range of behavioral domains, including cash management, credit/debt management, comparison shopping/thrift, savings, retirement planning, emergency funds, and insurance/risk management, within a simplified two-factor structure. This simplified two-factor structure provides a context-sensitive yet empirically robust tool for advancing FMB research and informing FMB interventions in India and similar emerging economies.
short-term financial management behavior
Copyright (c) 2026 Vineetha Mathew, Sanjeev M.A., Kirti Goyal, Biju Ajithakumari Vijayappan Nair, Jing Jian Xiao https://creativecommons.org/licenses/by-nc/4.0
Are multiple share class funds poorly governed?
Utilizing independent Morningstar Stewardship Grades, this article finds that multiple share class mutual funds (MS funds) have lower quality governance. Ordered probit regressions indicate MS funds are more likely to have lower board quality ratings and managerial incentive ratings, additional evidence the MS structure has not provided the benefits initially put forth by supporters. The results continue to demonstrate that less sophisticated investors seeking financial advice (those typically utilizing MS funds) may potentially be directed to funds that underperform and have higher costs.
Copyright (c) 2019 Academy of Financial Services https://creativecommons.org/licenses/by-nc/4.0
Effects of Investment Advice on Investment Trusts: Evidence from Individual Investors Using Japanese Banks
This study examines the association between customers’ assessments of financial guidance from advisors at Japanese regional financial institutions and their investment behavior regarding investment trusts. Using multi-year survey data from Japanese investors, we analyze how different facets of financial advice, including risk and cost explanations and information provision, are associated with investment decisions. The results indicate that investors who provide more favorable evaluations of financial advice tend to allocate a larger share of their assets to investment trusts. This pattern is particularly evident for evaluations related to information provision. In addition, investors who purchase investment trusts through in-person channels tend to be older and to have lower financial literacy. Among these investors, higher evaluations of advice are associated with both a greater likelihood of initial investment and higher allocation levels. Overall, the findings suggest a robust association between subjective evaluations of financial advice and portfolio allocation decisions, without implying a causal relationship.
Copyright (c) 2026 Yuji Mori https://creativecommons.org/licenses/by-nc/4.0
Individual Financial Management in Practice: Advice, Investments, Insurance, and Measurement
Copyright (c) 2026 Elisabeth Sinnewe https://creativecommons.org/licenses/by-nc/4.0
U.S. Households’ Homeowners Insurance and Financial Well-being
This study investigates the association between U.S. homeowners insurance decisions and financial well-being, specifically examining the moderating role of financial literacy. Utilizing weighted cross-sectional data (2019–2022) from the Understanding America Study (UAS), we employ Ordinary Least Squares (OLS) regression to analyze how voluntary insurance uptake among outright (mortgage-free) homeowners relates to subjective financial security. Our findings reveal that insured outright owners report significantly higher levels of financial well-being compared to both renters and uninsured owners. Furthermore, interaction models demonstrate that financial literacy acts as a critical cognitive moderator; the positive association between insurance and well-being is strongest for households with medium-to-high financial literacy, suggesting that literacy enables homeowners to better realize the utility of risk-transfer mechanisms. To ensure the integrity of our results, we addressed heteroskedasticity using bootstrapping and Robust Variance-Covariance Estimates and mitigated selection bias through Nearest-Neighbor Matching, which confirmed a robust Treatment Effect. These results suggest that while housing equity provides a baseline for security, formal insurance is essential to maximizing financial well-being. Implications for policymakers include the need to incentivize insurance among mortgage-free households and integrate financial literacy modules into housing programs. For financial planners, the study highlights the importance of addressing socio-economic and cognitive differences when advising clients on risk management and asset protection.
decision-making under risk and uncertainty
Copyright (c) 2026 VIKESH KUMAR, Stuart J. Heckman https://creativecommons.org/licenses/by-nc/4.0
The loss of the ability to work poses substantial financial risks that are often not adequately covered by state benefits. Although private disability insurance (DI) may complement public insurance systems, demand remains comparatively moderate in many countries. Using Germany as an empirical setting, this study examines behavioral factors associated with private DI purchase intentions and purchase behavior. An exploratory sequential mixed methods design is employed. First, semi-structured interviews with financial advisors are conducted to assess the practical relevance of the Theory of Planned Behavior (TPB) and to identify additional salient factors for DI demand emerging from advisory practice. Building on these insights, the study develops a two-layered research model in which TPB serves as a behavioral foundation and qualitative findings inform model extensions. Second, the resulting model is tested using survey data from 323 consumers through partial least squares structural equation modeling (PLS-SEM) and importance-performance map analysis (IPMA). The results confirm the suitability of TPB for explaining private DI demand. Beyond this behavioral baseline, perceived product benefits and risks shape attitudes toward private DI. Furthermore, DI knowledge emerges as an important product-specific dimension of insurance literacy that influences perceived product benefits, perceived product risks, and perceived behavioral control. The study contributes to the literature on insurance demand behavior by integrating DI-specific evaluative and knowledge-related mechanisms into a TPB framework. Furthermore, the findings provide practical implications for improving insurance literacy and supporting informed and needs-appropriate decisions regarding protection against disability-related income loss.
partial least squares structural equation modeling (PLS-SEM)
Copyright (c) 2026 Sascha Kwasniok https://creativecommons.org/licenses/by-nc/4.0
Selecting a Social Security age to balance consumption and risk
This article uses Monte Carlo simulation to determine the maximum consumption given retire- ment at age 62, initial wealth, risk tolerance, and Social Security take decision. Coile et al. (2002) argue for a delay, because the payment increases seven percent for each year. Focusing on maximiz- ing the expected present value of benefits may be misguided. This article shows that, conditional on retirement at age 62, initial consumption is always maximized by taking Social Security no later than age 63; it also results in the highest simulated ending wealth at death, and the lowest amount of simulated time (if any) living on just Social Security.
Copyright (c) 2020 Academy of Financial Services https://creativecommons.org/licenses/by-nc/4.0
Career and education choice as central elements of long- term financial planning
Career and education choice play a central role in individual’s long-term financial planning. In defining individual’s overall wealth, we not only consider the financial wealth (net worth), but also incorporate individual’s human capital (expressed as the present value of future earnings) as a com- ponent of the wealth function. We demonstrate that human capital accounts for the majority of an individual’s wealth portfolio in most cases for most of individual’s life. By including human capital in the traditional theoretical portfolio choice framework, we show that the choice of career and edu- cation level has a significant effect on the Sharpe ratio of an individual’s overall wealth portfolio. We conclude by providing several examples of the computations of the present values of future aver- age earnings streams for individuals of various education levels from several different occupations. The calculations are meant to illustrate how an individual can perform a simple NPV-like analysis when in the process of career planning.
A theoretical examination of cash-back credit cards and their effect on consumer spending
The role of cash-back credit cards in personal financial strategies is highly debated. For example, Dave Ramsey (Ramsey, 2019) urges consumers to avoid even the most lucrative cash-back cards, while others argue that these cards offer significant savings. Herein, we construct models to analyze the use of cash-back cards by rational consumers, demonstrating that cash-back cards increase spending (and, thus, reduce savings) for some consumers. While prior research focuses on behavioral issues related to credit cards, our research is the first to show that some consumers will rationally increase spending when using a cash-back credit card in lieu of cash.
Develop a retirement plan and stick to it
This study explores the relationship between financial literacy, behavior and attitude, and retire- ment savings decisions. Members of a South African tertiary institution’s retirement fund were sur- veyed and multistage multivariate regression and mediation analyses showed that developing and conforming to a retirement plan positively influenced financial attitude and behavior. This indicates that interventions should focus on the specific behaviors which drive retirement planning, rather than financial literacy in isolation. Use of formal tools such as consulting with a financial planner also increases the relative risk of successful retirement planning. This presents a tangible and linear approach towards improved financial behavior.
Conceptualizing financial advice in Australia
Many individuals entrust financial advisors to navigate through important financial decisions, yet extant research and persistent scandals bring the effectiveness of advice into question. In examining the Australian financial advice sector, we determine when financial advice can be provided in a cli- ent’s best interest and formulate a model differentiating types of financial advice and their relation- ship to best interest practice. We extend this model to form an integrated framework considering external stakeholders that encourage, and business models which prevent, best interest practice. Our examination reveals some business models prioritize financial institution interests whilst thwarting external stakeholders encouraging best interest practice.
Fear and trust in financial institutions
Financial institutions are pillars of the economy and play an important role in consumers’ daily lives. As such, trust between financial institutions and the consumers they serve is of paramount impor- tance. Using an online survey administered during the COVID-19 pandemic, this paper uses a qualitative content analysis methodology to explore consumer fear and trust in financial institutions. Stemming from fear of loss, three themes emerged: (1) history and experience, (2) perceived unfair practices/lack of knowledge of banking, and (3) general trust issues. Implications for financial institu- tions are presented based on these results.
Copyright (c) 2023 Academy of Financial Services https://creativecommons.org/licenses/by-nc/4.0
The perfect withdrawal amount over the historical record
What has been the perfect withdrawal amount (PWA) from retirement savings accounts in long- term historical data? The PWA is that which, if taken out in the first year of retirement and used again every year adjusted by inflation, leaves exactly the desired final balance on the account. We present the formula for obtaining this measure and evaluate the values it has taken in the past under varying combi- nations of the relevant parameters. We find that safety-minded investors should enter retirement with a higher stock allocation than what is currently used in most investment funds designed to provide income during retirement.
Active vs. passive, the case of sector equity funds
This paper examines performance of 95 actively managed U.S. sector equity mutual funds from 29 fund families relative to their peer exchange-traded funds, SPDR sector ETFs, in the period of 2008 to 2017. Our results do not show considerable evidence that actively managed sector mutual funds outperform their passive counterparties. None of the mutual fund portfolios produces a signifi- cant positive alpha through factor models or delivers a significant positive alpha against their peer ETFs. When focusing on the nine oldest actively managed Fidelity sector mutual funds, outperform- ance in the period of 1999–2010, which is reported in literature, appears to fade away during the pe- riod of 2011-2017. Alpha analyses of a larger sample of 60 sector mutual funds show similar performance deterioration in the same 19-year period. The results indicate that U.S. sector equity market has become more efficient in the past decade.
Are “fun” sources of windfalls destined to be spent hedonistically?
Recently, Richard Thaler was awarded a Nobel Prize for his work in developing Behavioral Economics. While much of economics assumes that people act rationally, Areily (2008), expanding on Thaler’s body of work, proves that we are not only often irrational, but we are predictably irrational. When an interviewer asked Thaler how he would spend the roughly $1.1 million in prize money, he responded, “This is quite a funny question.” Thaler added, “I will try to spend it as irrationally as possible.” We know that affective tags for money exist but what specifically are those affective tags? More specifically still, is one of those tags for sources of income “fun,” and if so, does that affect whether the money will be spent on fun? Classical economics would assume that satisfaction comes from the consumption of goods and services, that money is a medium of exchange, and that the source of that medium of exchange does not enter into the choice of the goods or services consumed. Thaler’s (1999) works show that people create mental accounts, indicating that the source of the money may not be as completely irrelevant as classical economics predicted. This is important because where irrational behavior is suboptimal behavior, if we can anticipate it, we can construct environments to support better choices. We find that fun sources of income are significantly more likely to be spent on fun expenditures. However, as the amount of the windfall increases, the amount spent on fun levels off, indicating that this affect may be bounded. We were unable to find statistically significant support that more “adult” sources of income are more likely to be spent on more adult uses, but money from adult sources was significantly more likely to be invested. This is important because understanding more about affective tags and how they affect decisions to use money, we become better predictors of irrational behavior.
A portfolio of leveraged exchange traded funds
This study demonstrates how a portfolio of leveraged exchange traded funds (LETFs) targeting a unit exposure to their underlying indexes outperforms a portfolio using traditional ETFs while simultaneously reducing downside risk. By extension, a 3x LETF portfolio designed to mimic 2x LETFs outperforms the underlying 2x LETF portfolio. The results are primarily a function of LETFs borrowing short while the investor lends the additional wealth generated from this leverage in one- to seven-year Treasury bonds or similar type of assets. For every one percent earned above the implied borrowing rate, a portfolio of 2x and 3x LETFs outperforms a traditional portfolio by 0.41% and 0.63%, respectively, corresponding roughly to the additional return on the 50% and 67% of the wealth invested in bonds. More than 90% of LETFs outperformance is explained by the borrowing lending differential.
The decrease in life insurance ownership
Based on our analyses of Survey of Consumer Finances datasets, the proportion of households owning a life insurance policy decreased from 72% in 1992 to 60% in 2016. We estimated logistic regressions on the likelihood of ownership of any, term, and cash value life insurance. We conclude that changes in household characteristics accounted for the decrease in term life insurance ownership, but not for the decreases in any and in cash value life insurance ownership. We also found a positive association between use of a financial planner and life insurance ownership. We discuss implications for financial planning.
Great Financial Advisers Are Well-Being Advisers
Great financial advisers are well-being advisers, offering holistic advice that builds clients’ life well-being on the foundation of financial well-being. Interviews with investors in the US, UK, Mexico, and China show how they enhance their life well-being in the domains of finances, family and friends, work, and health.
Copyright (c) 2026 Meir Statman https://creativecommons.org/licenses/by-nc/4.0
Household Financial Decision-Making: Miscalibration, Mortality, Emotion, and Culture
Financial Services Review Masthead (2026) Volume 34 Issue 1
This paper investigates the changing nature of equity investment risk across time horizon, an important issue in asset allocation decisions. We extend the literature by concentrating on different investment styles and by incorporating investors' risk tolerance into the analysis. Our results show that for more risk-averse investors, the large-cap growth style is the safest style over shorter investment horizons, while a small-cap value style over longer investment horizons. However, for more aggressive investors, the small-cap value style is always the safest regardless of the investment horizons. In addition, the small-growth style is the most risky across all investment horizons for both types of investors. Those results will help individual investors determine the best suited investment styles given their investment horizon and risk preferences.
Copyright (c) 2010 Academy of Financial Services https://creativecommons.org/licenses/by-nc/4.0
Pricing represents a key variable in the financial advisory industry. For this reason we investigate the possibility of identifying the type of advisory provided by making use of a pricing policy that advisors adopt in the United States and Italy. The prevalence of 'opaque' forms of compensation leads us to identify which variables are able to predict the pricing policies (transparent or opaque) of a financial advisor. Results suggest that they are related to: the advisor's regulatory status (independent advisor or tied agent), the presence of certification issued by independent authorities, the involvement in a financial products distribution process and the high or low frequency of the payments that are due for the advisory service.
We examine whether Berkshire Hathaway, one of America's premier actively managed portfolios, can outperform the S&P 500. We find that the returns for Berkshire Hathaway appear higher than the S&P 500 from 1990 to 2009. However, when adjusted for risk, we find the return per unit of risk of Berkshire Hathaway is equivalent to the S&P 500. The relatively low correlation between the two portfolios suggests that an investor may benefit from holding both portfolios rather than either portfolio in isolation. Similar results are found when using the Vanguard 500 Index Fund to proxy the S&P 500.
The downside risk of postponing Social Security benefits
The point that only life participants may initiate or receive Social Security benefits is typically overlooked. Thus, a postponement of benefits at any eligible retirement age may be likened to participation in a game of chance in which the participant is subject to a variant form of the gambler's ruin at death. The typical assumption, therefore, that a participant should automatically opt for a postponement if the present value of the resulting benefits, discounted to breakeven age, higher than the present value of the oppotunity costs, carries with it the implication of risk neutrality in relation to the consequence of dying before reaching the breakeven death age. While this implication of risk neutrality is sometimes correct, it is more likely not. In marked contrast to conclusions reached in previous studies, this paper shows that a single Social Security participant, who is risk averse as regards the chances - and contingent consequences - of dying before reaching breakeven age, would be well advised to initiate benefits at the earliest age at which he or she would not be subject to earned income penalties.
The classic preretirement problem for the financial planner is to advise a client how much to save, how much must be saved each year to reach a specified goal, and how the investments should be allocated between fixed income and equity. The traditional solution is to assume a fixed rate of return for each asset class and test scenarios until the mixture of variables yields a solution that meets the stated savings goal and seems feasible for the client. This binary result (accept or reject the plan) ignores the inherent uncertainty. In this paper, we derive a stochastic model in which the rate of return and the rate of increase of annual savings are both variable and calculate the probability that a particular goal will be achieved, given any initial savings endowment, periodic additional savings amount, mixture of assets (represented by the return distribution), and time to the goal. The calculations can be done on an Excel spreadsheet. We illustrate the use and numerical results of the model with a realistic retirement planning scenario and variations on it. While this solution is particularly important for preretirement planning, it applies generally to meeting any financial goal, such as saving a down payment for a house.