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"Welcome to the Fall, 2022 Journal of Personal Finance. We are thrilled to share this robust and diverse issue! I am proud to have built this edition based on a strong pipeline of manuscript submissions. Each article in this issue dives into different areas of personal finance, adding to the body of knowledge in student financial well-being, determinants of advisory fees, racial and ethnic differences in ownership of insurance types of life insurance products, studies of personality types and insurance acquisition, and how to identify consumer financial opinion leaders. Additionally, we are able to feature work from the 2022 IARFC NFPC case study champions!

Editor Craig Lemoine, Ph.D., MRFC®, CFP®

Members of the IARFC can earn CE credits through the Journal of Personal Finance (JPF). Register to take the IARFC JPF Online CE quizzes and receive two for $20. Two hours of IARFC CE will be awarded to anyone who achieves a score of 13 or higher per quiz. Only one submission per member is allowed, quizzes are available as JPF issues are published. To register for a quiz click here.

Volume 21 Issue 2,  2022

2022 National Financial Plan Competition Winning Case Narrative - The Franklin Family

Sarah Chamberlain
Andres Mathis
Winning Team from Utah Valley University

Applying a Human Capital Framework to College Students' Financial Well-Being

Christopher M. Moore, MBA, CFP®
Juan E. Gallardo, MBA
Andrew Scott, MBA
Sonya Lutter, Ph.D., CFP®
This study examined the association between financial knowledge, application of that financial knowledge, financial behaviors, and financial well-being among college students. Using path analysis, indicators of financial knowledge and application (i.e., financial mastery and being a first-generation student) had a significant impact on financial behavior, which in turn had a significant impact on financial well-being. These findings show support for a human capital framework as applied to financial literacy and financial well-being. 

Determinants of Advisory Fee in U.S. Equity Mutual Funds

Srinidhi Kanuri
D.K. Malhotra
This study investigates the factors that influence the advisory fee and determines whether mutual funds' ADVISOR fees benefit from economies of scale. After adjusting for fund characteristics, empirical data demonstrate that growth in the advisory fee have been less than proportional to increases in assets in the US equities mutual fund sector, indicating industry-wide economies of scale in the advisory fee. In addition, older funds, index funds, deferred load funds, Class A funds, Class C funds, and institutional funds charge a lower advisory fee. On the other hand, mutual funds with a front-end load, a 12b-1 plan, and a higher turnover ratio charge a higher advisory fee. A mutual fund's advisor fee is also determined by the fund's investing goal. Advisory fees are also lower in funds with a larger administrative charge. The study did not find any evidence of the mutual fund cash flows and advisory fee.

Racial/Ethnic Differences in Life Insurance Ownership & Life Insurance Adequacy

Miranda Reiger, Ph.D., CFP®
Stuart Heckman, Ph.D., CFP®
This research aimed to measure racial/ethnic differences in life insurance ownership and life insurance underinsurance among Black, Hispanic, White, and Asian/other consumers. Using the 2019 Survey of Consumer Finances, profit regression analyses were utilized to determine whether there is an association between race/ethnicity and owning life insurance and whether there is an association between race/ethnicity and life insurance adequacy in relation to the respondents' human life value. Results show that Black households had a lower probability of owning life insurance when compared to White households. Hispanic households had a higher probability of being underinsured compared to White households. Use of a financial planner was associated negatively with underinsurance. Implications for financial professionals are discussed.

Personality Traits and Life Insurance Ownership Among Older Americans

Preston D. Cherry, Ph.D., CFP®
Sarah Asebedo, Ph.D., CFP®
At the end of 2020, American households owned $20.4 trillion of life insurance coverage (ACLI, 2020). While approximately 52 percent of Americans own some form of life insurance, 40 percent do not, and 102 million households feel that they are uninsured or underinsured (LIMRA, 2021). Furthermore, 42 percent of American households acknowledge that if the primary wage earner died unexpectedly, they would feel the impact within six months, while 25 percent would feel the impact within one month (LIMRA, 2021). there's a bevy of empirical research investigating the potential factors that could affect the demand for life insurance. A comprehensive review of the determinants of the demand for life insurance finds many conflicting associations across the life cycle, both financial and social (Liebenberg et. Al, 2012). Studies show that ages, marital status, number of children, education, spousal employment status, family income, and net worth characteristics are determinants of the demand for life insurance (Hau, 2000; Zietz, 2003). Previous literature finds that behavioral barriers, such as mental accounting, are potential barriers to the life insurance purchase decision (Doe & Belbase, 2016). The current study contributes to the existing literature by investigating personality trait associations with life insurance ownership (LIO). the results could help reduce the gap between the theoretical need and consumer demand for life insurance by providing information that aids financial planners in reframing recommendations to fit client personality traits.

This study investigates the determinants of consumer demand for life insurance. The literature suggests a behavior gap exists between the economic need for life insurance and the low propensity of consumer demand for insurance products. Researchers have examined potential factors for this life insurance demand "puzzle" with possible explanatory factors such as individual preferences, literacy level, and financial constraints. Although many factors have been studied, the life insurance demand "puzzle" persists. This study contributes to the literature by investigating the association between personality traits and life insurance ownership as a possible explanation for life insurance consumer demand. Financial planners and life insurance professionals could benefit from understanding their clients' personality traits to tailor recommendations in a way that could increase the efficiency of the client's information processing and thus potentially influence a favorable life insurance purchase decision.

Identifying Consumer Financial Opinion Leaders

Mohammad G. Nejad, Ph.D.
Genevieve O'Conner, Ph.D.
Yuliya Komarova, Ph.D.
This study explores consumer financial opinion leaders (Financial OLs) - consumers who lead others in personal financial decisions. We focus on identifying the demographic attributes of Financial OLs, their social connectivity, and their engagement with innovative consumer financial products and services. A survey of 486 U.S. respondents indicates that through Financial OLs are observed across all demographic groups, a greater percentage of Financial OLS is found among low-income and low-education groups. Further, unlike other domains results suggest that Financial OLs are not particularly socially connected and are not necessarily knowledgeable about the products and services in which they offer advice. Implications for research and financial interventions are provided.


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