Personal Financial Planning

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Acknowledgement

I would first like to express my gratitude for my research supervisor, colleagues, peers and family whose immense and constant support has been a source of continuous guidance and inspiration.

DECLARATION

I [type your full first names & surname here], declare that the following dissertation/thesis and its entire content has been an individual, unaided effort and has not been submitted or published before. Furthermore, it reflects my opinion and take on the topic and is does not represent the opinion of the University.

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Table of Contents

CHAPTER 1 INTRODUCTION2

Background of the study2

Problem Statement3

Aims and Objectives4

Research Hypothesis5

Rationale6

Significance of the Study6

Organization of Dissertation7

CHAPTER 2 LITERATURE REVIEW8

Customer Trust8

Relationship Commitment8

History and Theoretical Foundations of Financial Planning8

The Strategy-Making Process in Financial Planning12

Financial Knowledge and Management18

REFERENCES21

Chapter 1 Introduction

Background of the study

Customer trust and commitment are two of the most powerful predictors of a successful financial planning engagement. A customer's trust in the financial planner and commitment to the financial planning relationship can lead directly to a number of positive outcomes. These include high acquiescence, a low propensity to leave, a high degree of cooperation, and functional conflict (i.e. the ability to maintain a highly functional relationship even when conflicts arise) (Hunt and Morgan, 1994, pp 25). These qualities in turn tend to lead to long-lasting relationships for which financial planners have both a process-motive and a profit-motive. The process-motive arises from the nature of personal financial, planning itself which involves multiple, integrated steps that must unfold over time, often requiring a period of years successfully formulate, communicate, and implement (Katz. 1996; Christiansen and DeVaney, 1998, pp 185). Higher levels of commitment and trust have been shown to be associated with greater customer openness in disclosing personal and financial information, as well as greater cooperation in implementing planning recommendations (Sharpe and Anderson, 2008, pp 98).

The profit-motive arises from the fact that it typically costs much less to retain existing customers than it does to attract new ones (Christiansen and DeVaney, 1998, pp 87), making long-lasting relationships more profitable than those of shorter duration. Relationships exhibiting high trust and commitment are also associated, with a greater customer propensity, to make referrals (Sharpe and Anderson, 2008, pp 48). It is therefore, of great interest to financial planners to know what they can do to foster customer trust and commitment and thus reap these many benefits. Answering this question is difficult, however, since financial planning, like many other professional services, has high-credence properties, meaning consumers have difficulty judging the quality of the service even after it has been rendered (Darbi and Karni, 1973, 99 85). One need only consider that financial planners are routinely asked to recommend strategies for attaining goals that are years or even decades in the future to see how this concept applies.

Problem Statement

In spite of the consumer's difficulty in directly assessing the value of high-credence services, many antecedents to trust and commitment in the context of professional services have been proposed. These include switching costs, relationship benefits, shared values, communication, and opportunistic behavior, ...