Editorial: Volume 3, Issue 2

In the mid-year issue of the Journal of Financial Therapy, we highlighted the many accomplishments the Journal has made in just three short years. The submissions to the Journal continue to grow, the quality of submissions is increasing, and the diversity of topics is expanding. For example, in this issue, topics of articles are not only specifically related to financial therapy, but also include: (a) financial literacy and social work, (b) financial coaching, and (c) financial trauma and tactical asset management. Seeing the Journal expand and grow is very exciting

Editorial

The Journal of Financial Therapy continues to garner national and international attention. This is largely due to the excellent submissions received and the outstanding work of the editorial board and reviewers. Although the Journal is just beginning its second year, papers from the past and current issue have been quoted in the media, on the Internet, and in college classrooms. A simple Google Internet search of the phrase “financial therapy” leads those navigating the World Wide Web directly to the Journal. In conjunction with New Prairie Press, papers, reviews, and profiles are accessible to anyone in the world via the open access journal network, which makes it highly likely that authors will be referenced in additional manuscripts. It is definitely an exciting time to be involved in the development of financial therapy as a new field of study through the Journal

An Investigation of Response Bias Associated with Electronically Delivered Risk-Tolerance Assessment

A randomized experimental study was designed to compare risk-tolerance scores for those who completed a paper-and-pen risk-tolerance assessment instrument (i.e., the control group) to those who answered the same questions using an electronic method. It was hypothesized that the possibility of an electronic bias might be present. Controlling for financial knowledge, which was positively associated with risk tolerance, men were found to report much higher risk-tolerance scores than women when responding to electronically delivered questions. Results suggest that financial therapists ought to consider this possibility as a factor that influences responses to risk assessments, especially as they incorporate additional technological evaluation tools into their practice

Inter-Observer Risk-Tolerance Agreement Between Husbands And Wives

The purpose of this research was to test the extent to which variability in husbands’ and wives’ self-assessed financial risk can be attributed to variation in risk tolerance or observer bias resulting from measurement error. Using a sample of 188 well-educated married couples, scores from the Survey of Consumer Finances single risk-assessment item were used to evaluate the following null hypothesis: Husbands and wives do not agree on their level of financial risk tolerance. The hypothesis was tested using a percentage agreement test, a Kappa coefficient test, and a chi-square analysis. Findings led to a rejection of the null hypothesis. That is, couples exhibited general agreement in their assessment of financial risk tolerance, although the level of agreement was rather modest

The Impact Of Decision Power On Financial Risk Tolerance And Asset Allocation

This research considers the impact of decision power (Blood & Wolfe, 1960) and demographic variables within a couple’s relationship on risk tolerance and portfolio risk levels. Married couples (N = 175) separately completed a survey consisting of the Blood and Wolfe Decision Power Index, the Survey of Consumer Finances risk tolerance question, demographic information, and selected financial variables. Unlike their husbands, the study found an effect of decision power for wives and portfolio risk level, suggesting that the wife’s decision power affects portfolio risk levels. Decision power was found to be a significant factor in risk tolerance for both the husband and wife. Findings indicate that both portfolio risk levels and risk tolerance is determined by the education of the wife and not the husband. Further, a divergence in risk levels occurred when the husband owned a greater degree of assets than the wife

Editorial

Welcome to the first edition of the Journal of Financial Therapy

Risk Tolerance Estimation Bias: The Age Effect

Older individuals are generally assumed to be less risk tolerant compared to others. The purpose of this research was to test how accurately working adults at different ages in the lifespan estimate their risk-taking propensity. Differential predictions, using ANOVA and regression analyses, were assessed. Findings suggest that younger working adults tend to over-estimate their risk tolerance compared to older working adults. Although those in middle-age were shown to under-estimate their risk tolerance compared to the youngest working adults, the results were not significant. A discussion of findings is presented with the proposition that over- and under-estimation of risk tolerance might help explain the types of risk-taking behaviors engaged in by individuals over time

Life Insurance Consumption as a Function of Wealth Change

This article used a large nationally representative longitudinal dataset to explore the association between changing socioeconomic factors and household consumption of life insurance across time. This study specifically examined the association between changes in wealth and life insurance consumption controlling for household characteristics and psychosocial factors. Empirical results indicate that during the 2004-2008 period, an increase in net worth was positively associated with purchases of additional cash value life insurance at the household level. Women and Black households were also more likely to increase their life insurance consumption during this period. Saving intention was likewise found to be positively associated with an increase in household life insurance consumption. Results suggest that life insurance acts a complement to, rather than substitute for, wealth. Implications of the findings of this study for individual investors, scholars and practitioners have been included

Personal and Family Finance in the Marriage and Family Therapy Domain

The purpose of this study was to determine what changes have occurred in the past 20 years in accredited marriage and family therapy (MFT) programs in terms of student training and preparation for treating family financial concerns. MFT program directors (N = 18) and students (N = 102) responded to an emailed a web survey. Findings indicated that only two master’s degree programs, two doctoral programs, and one post-graduate program offered a personal or family finance course elective. A discussion about the implications this limited exposure to personal finance topics plays in professional training is provided

Sibling Position and Risk Attitudes: Is Being an Only Child Associated with a Person’s Risk Tolerance?

The influence of birth order on personality has been studied for several decades, but little research has been conducted on the association between sibling position and risk tolerance. The purpose of this study was to examine the relationship between being an only child and risk-taking attitudes. Data from the 2010 National Longitudinal Survey of Youth, 1979 sample was used to test the hypotheses that only children and first borns are similar, only children exhibit a lower risk tolerance when compared to those with siblings, and only children exhibit a lower risk tolerance when compared to those with siblings when first borns are removed and only borns are compared with later borns. Results did show that only children are similar to first borns in nearly every domain of risk tolerance considered. Furthermore, they do not exhibit dramatically different risk attitudes than those with siblings when the variables of sex, locus of control, and net worth are controlled