Financial Literacy Overconfidence and Financial Advice Seeking

This study examines potential effects of overconfidence on financial advice usage. Financial literacy overconfidence is defined as the gap between consumers’ subjective and objective financial knowledge. Using a representative national survey, the result shows that over 11 percent of respondents display financial literacy overconfidence: They score higher than the average on perceived financial knowledge but are unable to answer three or more financial literacy questionscorrectly. These overconfident consumers are less likely to seek professional financial advice in saving/investment and mortgage but more likely to exhibit demand for advice related to debt counseling and tax planning