Academic journal article Financial Services Review

Household Use of Financial Planners: Measurement Considerations for Researchers

Academic journal article Financial Services Review

Household Use of Financial Planners: Measurement Considerations for Researchers

Article excerpt


As an academic discipline, personal financial planning is still relatively new. The first doctoral program in personal financial planning was established at Texas Tech University in 2000 (Brandon and Welch, 2009)-a mere 16 years ago. Although researchers have been investigating issues related to personal financial planning for some time, the development of a dedicated doctoral program is indicative of the developmental stage of the field. Since the first program at Texas Tech, three additional universities (Kansas State University, University of Georgia, and University of Missouri) have established Certified Financial Planner (CFP) Board registered doctoral programs that have led to a growth in the number of financial planning researchers and a corresponding increase in the scientific knowledge base. However, as in any field of knowledge, scientific advancement is dependent upon proper measurement of the relevant objects or concepts.

In personal financial planning, an important research objective is to determine the effect of financial planner use on household well-being.1 To properly investigate this relationship, it is necessary to determine whether or not a household receives financial planning advice. At first glance, this may seem simple. However, a careful assessment of publically available datasets indicates that this measurement is not straightforward. The objective of this study is to promote increased rigor in the field of personal financial planning research by examining the important issue of measurement as it relates to household use of financial planners. Specifically, we analyze the validity of available measures of household financial planner use in publicly available datasets and provide recommendations for the development of new measures of financial planner use.


Although measurement has been defined in a variety of ways, two definitions are especially important to the current study. Stevens (1951) defines measurement as "the assignment of numbers to objects or events according to rules" (p. 22). While this definition is quite good for the natural sciences, it may be limited in social science applications in which abstract concepts are more often the subject of investigation (rather than objects) (Carmines and Zeller, 1979). Zeller and Carmines (1980) define measurement as "a process of linking abstract concepts to empirical indicants" (p. 2). Carmines and Zeller (1979) emphasize the importance of measurement as it allows scientists to test theoretical propositions-if the empirical indicant (i.e., a variable that can be observed) is weakly related to the underlying phenomenon of interest (i.e., the unobserved concept), any analysis of the data may lead to incorrect inferences. Therefore, we consider measurement to be a process in which objects, events, or concepts are systemically classified and represented to advance knowledge.

With this understanding of measurement, we can return to the objective of the current analysis. To properly classify households according to whether or not they use a financial planner, several challenges become apparent. Even among professionals who refer to themselves as financial planners, there is great diversity in the scope of services provided, ranging from primarily investment advice or another specialized area to comprehensive financial planning. Consequently, self-reported data from households will be noisy as there is likely substantial variation between households in the types of financial service professionals (e.g., banker, stock broker, insurance agent, etc.) that come to mind when they hear the term, "financial planner." Therefore, an important starting point for research regarding financial planner use is to clearly define the intended event to be measured. Although a number of studies examine the effect of financial planner use, little attention is given to clearly defining what is meant by use of a financial planner. …

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