Factors Associated With Hiring and Firing Financial Advisors During the Great Recession

From 2007 to 2009, the U.S. economy went through a deep economic downturn which is popularly known as the Great Recession. It resulted in a significant loss of wealth for many investors. While some investors sought the advice of financial advisors; others did not. This study examines the economic si...

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Bibliographic Details
Published in:Financial counseling and planning 2019-11, Vol.30 (2), p.289-303
Main Authors: Cheng, Yuanshan, Kalenkoski, Charlene M, Gibson, Philip
Format: Article
Language:English
Subjects:
Advisors
Behavioral Sciences
Consumers
Counseling
Dismissal (Personnel)
Economic Climate
Economic conditions
Finance Occupations
Financial counseling
Financial planners
Financial planning
General Counseling
Great Recession
Households
Investment
Longitudinal Studies
Marriage and Family Counselling
National Surveys
Personnel Selection
Portfolio management
Portfolio performance
Recessions
Sale of a business
Undergraduate Students
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Summary:From 2007 to 2009, the U.S. economy went through a deep economic downturn which is popularly known as the Great Recession. It resulted in a significant loss of wealth for many investors. While some investors sought the advice of financial advisors; others did not. This study examines the economic situation of households using the National Longitudinal Survey of Youth (NLSY) and analyzes the financial advisor-client relationship during the Great Recession to determine who fired or hired a financial advisor during this period. The results indicate that losing money, measured by a decrease net worth, was not the main reason why clients fired their financial advisor during the Great Recession. Interestingly, the results also show that experiencing a decrease in net worth was not the main reason why individuals pursued the services of a financial adviser during this period. Instead, current income and an increase in income were the primary factors that impacted the client-advisor relationship during the financial crisis. These results are consistent with consumer demand theory in which financial services are a normal good that people purchase less of when their income falls.
ISSN:1052-3073
1947-7910
DOI:10.1891/1052-3073.30.2.289