Trust in Financial Services

ABSTRACT

We examine how generalized trust relates to investing, building on previous literature by simultaneously considering different accounts, assets, and the use of financial advice. We find that account ownership and financial advice are positively correlated with trust. For types of assets, we find mixed results: a positive relationship for assets that involve delegation of decision making; no relationship for cryptocurrency; and a negative relationship for precious metals. We find a positive relationship with having a financial professional take action on your behalf. Our results are consistent with a model where nontrusting investors perceive greater risk of loss.

JEL Classification: D14, G11, Z13