Jill E. Fisch is visiting Professor at Berkeley Law School and Perry Golkin Professor of Law and co-director of the Institute for Law and Economics at the University of Pennsylvania Law School where she teaches and writes on corporate law, corporate governance and securities regulation. Professor Fisch is the recipient of various awards including the Penn LLM Prize for Excellence in Teaching and the Robert A. Gorman Award for Excellence in Teaching. Her scholarship has appeared in a variety of publications including the Harvard Law Review, the Yale Law Journal, the Columbia Law Review, the University of Pennsylvania Law Review and the Texas Law Review. Recent research focuses on corporate governance, the shareholder voting process, and securities litigation. Professor Fisch is also involved in ongoing experimental work analyzing retail investor decision-making and the role of financial literacy.
Prior to joining Penn, Professor Fisch was the T.J. Maloney Professor of Business Law at Fordham Law School and Founding Director of the Fordham Corporate Law Center. She has served as a visiting professor at Harvard Law School, Columbia Law School and Georgetown University Law Center. She has lectured on corporate and securities law in China, Japan, Israel, Sweden, Norway, France, Germany and the United Kingdom.
Professor Fisch practiced law as a trial attorney with the United States Department of Justice, Criminal Division, and as an associate at the law firm of Cleary, Gottlieb, Steen & Hamilton. She is a member of the American Law Institute and a director of the European Corporate Governance Institute. She chaired the Committee on Corporation Law of the Association of the Bar of the City of New York and the sections on Securities Regulation and Business Associations of the Association of American Law Schools. She received her B.A. from Cornell University and her J.D. from Yale Law School.
The dramatic shift from traditional pension plans to participant-directed 401(k) plans has increased the obligation of individual investors to take responsibility for their own retirement planning. With this shift comes increasing evidence that investors are making poor investment decisions. This Article seeks to uncover the reasons for poor investment
This Article seeks to uncover the reasons for poor investment decisions. We use a simulated retirement investing task and a new financial literacy index to evaluate the role of financial literacy in retirement investment decisionmaking in a group of nonexpert participants. Our results suggest that individual employees often lack the skills necessary to support the current model of participant-directed investing. We show that less knowledgeable participants allocate too little money to equity, engage in naive diversification, fail to identify dominated funds, and are inattentive to fees. Over the duration of a retirement account, these mistakes can cost investors hundreds of thousands of dollars.
We then explore the capacity of professional advisors to mitigate this problem. Using the same study with a group of professional advisors, we document a predictable but nonetheless dramatic knowledge gap
Ian Ayres is a lawyer and an economist. He is the William K. Townsend Professor at Yale Law School, the Anne Urowsky Professorial Fellow in Law, and a Professor at Yale’s School of Management. (Ayres Resume)
Professor Ayres has been a columnist for Forbes magazine, a commentator on public radio’s Marketplace, and a contributor to the New York Times’ Freakonomics Blog. His research has been featured on PrimeTime Live, Oprah and Good Morning America and in Time and Vogue magazines.
Ian has published 11 books (including the New York Times best-seller, Super Crunchers) and over 100 articles on a wide range of topics. His latest book is Carrots and Sticks: Unlock the Power of Incentives to Get Things Done. In 2010, he also published Lifecyle Investing (with Barry Nalebuff).
Ian is a co-founder of stickK.com, a web site that helps you stick to your goals.
In an Illinois post-conviction proceeding, Ayres helped convince a court to vacate his client’s death sentence.
In 2006, he was elected to the American Academy of Arts and Sciences. His book with Greg Klass, Insincere Promises: The Law of Misrepresented Intent, won the 2006 Scribes book award “for the best work of legal scholarship published during the previous year.” Professor Ayres has been ranked as one of the most prolific and most-cited law professors of his generation. See James Lindgren & Daniel Seltzer, The Most Prolific Law Professors and Faculties, 71 CHI.-KENT L. REV. 781 (1996); Fred R. Shapiro, The Most-Cited Legal Scholars, 29 J. LEGAL STUD. 409 (2000). The Chronicle of Higher Education referred to Ayres as “a law-and-economics guru.”
He was born and raised in Kansas City, Missouri, received his B.A. (majoring in Russian studies and economics) and J.D. from Yale and his Ph.D in economics from M.I.T. Professor Ayres clerked for the Honorable James K. Logan of the Tenth Circuit Court of Appeals. He has previously taught at Harvard, Illinois, Northwestern, Stanford and Virginia law schools and has been a research fellow of the American Bar Foundation. From 2002 to 2009, he was the editor of the Journal of Law, Economics and Organization.
In the spring 2005, he published three books, Straightforward (with Jennifer Gerarda Brown); Optional Law; and Insincere Promises (with Gregory Klass). He is also the author of Why Not?(2003) (with Barry Nalebuff); Voting with Dollars (2002) (with Bruce Ackerman) and Pervasive Prejudice? (2001).
His two most cited law review articles are Fair Driving: Gender and Race Discrimination in Retail Car Negotiations, 104 Harvard Law Review 817 (1991) and Filling Gaps in Incomplete Contracts: An Economic Theory of Default Rules, 99 Yale Law Journal 87 (1989) (with Robert Gertner).
He is the author of several empirical studies: Does Affirmative Action Reduce the Number of Black Lawyers?, 57 Stanford Law Review 1807 (2005) (with Richard Brooks); To Insure Prejudice: Racial Disparities in Taxicab Tipping, 114 Yale Law Journal 1613 (2005) (with Fred Vars and Nasser Zakariya); A Separate Crime of Reckless Sex, 72 University of Chicago Law Review 599 (2005) (with Katharine Baker); Shooting Down the More Guns, Less Crime Hypothesis, 55 Stanford Law Review 1193 (2003) (with John J. Donohue III); Measuring the Positive Externalities from Unobservable Victim Precaution: An Empirical Analysis of Lojack, 113 Quarterly Journal of Economics 43 (1998) (with Steven D. Levitt); Pursuing Deficit Reduction Through Diversity: How Affirmative Action at the FCC Increased Auction Competition, 48 Stanford Law Review 761 (1996) (with Peter Cramton); A Market Test for Race Discrimination in Bail Setting, 46 Stanford Law Review 987 (1994) (with Joel Waldfogel); and Racial Equity in Renal Transplantation: The Disparate Impact of HLA-Based Allocation, 270 Journal of American Medical Association 1352 (1993) (with Robert Gaston, Laura Dooley and Arnold Diethelm).
Notwithstanding ERISA’s fiduciary requirements, a significant portion of 401(k) plans establish investment menus that predictably lead investors to hold high-cost portfolios. Using data from more than 3,500 401(k) plans with more than $120 billion in assets, we provide evidence that fees and menu restrictions in an average plan lead to a cost of seventy-eight basis points in excess of index funds. We also document a wide array of “dominated” menu options, which we define as funds that make no substantial contribution to menu diversity but charge fees significantly higher than those of comparable funds in the marketplace. We argue that courts should read existing fiduciary-duty law to challenge plans that imprudently include high-cost or dominated options, even if other options are available in the plan menu. But because heightened fiduciary duties are unlikely by themselves to solve the problem of excess fees and dominated funds, we also propose three additional structural reforms. We argue that low-cost default options be made universally available, that investors be permitted to roll assets out of designated high-cost plans, and that participants be required to demonstrate financial sophistication before investing in higher-cost funds.
Annamaria Lusardi is the Denit Trust Chair of Economics and Accountancy at the George Washington University School of Business (GWSB). Moreover, she is the founder and academic director of GWSB’s Global Financial Literacy Excellence Center (GFLEC). Previously, she was the Joel Z. and Susan Hyatt Professor of Economics at Dartmouth College, where she taught for twenty years. She has also taught at Princeton University, the University of Chicago Harris School of Public Policy, the University of Chicago Booth School of Business, and Columbia Business School. From January to June 2008, she was a visiting scholar at Harvard Business School. She holds a Ph.D. in Economics from Princeton University and a BA in Economics from Bocconi University.
Dr. Lusardi has won numerous research awards. Among them is a research fellowship from the University of Chicago Harris School of Public Policy, a faculty fellowship from the John M. Olin Foundation, and a junior and senior faculty fellowship from Dartmouth College. She was also awarded the 2015 Financial Literacy Award from the International Federation of Finance Museums, the 2014 William A. Forbes Public Awareness Award from the Council for Economic Education, the 2013 William E. Odom Visionary Leadership Award from the Jump$tart Coalition for Personal Financial Literacy, and the National Numeracy Network’s inaugural 2012 Steen Award. Moreover, she is the recipient of the 2007 Fidelity Pyramid Prize, an award to authors of published applied research that best helps address the goal of improving lifelong financial well-being for Americans.
She has published more than sixty academic articles and edited two books: Overcoming the Saving Slump: How to Increase the Effectiveness of Financial Education and Saving Programs published by the University of Chicago Press in 2008, and Financial Literacy: Implications for Retirement Security and the Financial Marketplace, joint with Olivia Mitchell, published by Oxford University Press in 2011. Dr. Lusardi chairs the Programme for International Student Assessment (PISA)’s Financial Literacy Expert Group. She also chairs the OECD/International Network on Financial Education’s Research Committee. In 2009, she served as a faculty advisor for the Office of Financial Education of the U.S. Treasury.
Paul Yakoboski is a senior economist with the TIAA Institute where he is responsible for research on lifetime financial security, including topics related to defined contribution plan design, individual saving and investment decisionmaking, financial literacy and capability, and asset management during retirement, as well as research on workforce issues in the higher education and non-profit sectors. He also develops and organizes Institute symposia in these areas. Yakoboski is director of the Institute’s Fellows Program and editor of the Trends and Issues publication series.
Prior to joining the TIAA Institute, Yakoboski held positions as Director, Policy Research for the American Council of Life Insurers, Senior Research Associate with the Employee Benefit Research Institute and Senior Economist with the U.S. Government Accountability Office. He previously served as Director of Research for the American Savings Education Council and was an adjunct instructor at Nazareth College.
Yakoboski is a member of the American Economic Association and the National Academy of Social Insurance. He also serves on the board of the Journal of Retirement, the editorial advisory board of Benefits Quarterly, the research committee of the Insured Retirement Institute and the Society of Actuaries’ Committee on Post-Retirement Needs and Risks. Yakoboski earned his Ph.D. and M.A. in economics from the University of Rochester and his B.S. in economics from Virginia Tech.
Ms. Smith is a Senior Economist in the Social Security Administration’s Office of Retirement Policy, where her research interests focus on the intersection of Social Security and financial education. One of her current research projects focuses on the impact of the Social Security Statement on retirement-benefit-claiming age. She has also worked with staff at the U.S. Department of Labor to develop a Retirement Toolkit that provides a timeline for making decisions about receiving pensions, Social Security, and Medicare along with references to additional information.
Prior to joining the Social Security Administration, she worked for the Board of Governors of the Federal Reserve System. Before that, she established and directed the Financial Education Project at the Organisation for Economic Cooperation and Development in Paris, France. Under her supervision, the Project produced the first major international study of financial education programs. She has also worked as a Senior Economist at the U.S. Government Accountability Office in Washington, DC, where she was responsible for leading projects on Social Security and pension issues. Ms Smith has taught economics at Old Dominion University in Norfolk, Virginia, and worked as a research associate at Mathematica Policy Research and as a junior economist at the Council of Economic Advisers. She received her Ph.D. from the University of Michigan.
Barbara A. Smith, Social Security Administration, and Kenneth A. Couch, University of Connecticut
Policymakers are increasingly concerned about the retirement security of American workers. Social Security retirement benefits represent an important component of retirement income for most workers. The decision as to when to claim these benefits is one of the most serious financial decisions that individuals will make. Articles in both the popular press and the research literature discuss how delayed claiming can contribute to retirement security. We look at how the retirement benefit claiming decision is affected by the information provided in the Social Security Statement, which the Social Security Administration (SSA) has been mailing to American workers since 1995.
Our previous work showed that receipt of the Statement led to sizeable increases in knowledge about Social Security Administration programs and benefits. We continue this research making use of the Continuous Work History Sample (CWHS) to analyze the impact of Statement receipt on claiming of Social Security retirement benefits and individual labor force participation. We estimate models that contrast those who would have received a Statement with those who would not have making use of the implementation schedule for the mailings. We also examine the effect of controlling for the increase in full retirement age (FRA) that occurred for individuals turning 62 in 2000 through 2004. This allows us to contrast impacts of the mailing with other changes in retirement policy and separate their effects empirically.
We find that receipt of the Statement resulted in statistically significant decreases in benefit claiming at earlier ages and corresponding increases in claiming at later ages. Even after controlling for the impacts of the FRA, we find that receipt of the Statement had a significant effect on claiming behavior. These patterns are stronger among sub-groups who received a greater number of Statement mailings from SSA and those that have more attachment to the labor market. Receipt of the Statement also resulted in significant increases in labor force participation at all ages from 62 through 70. Our results, although preliminary, suggest that the provision of information might be an effective tool for policymakers interested in encouraging retirement security by having workers delay claiming Social Security benefits and work longer.
Francesco D’Acunto is an Assistant Professor of Finance at the University of Maryland, R.H.Smith School of Business. He obtained a Phd in Finance at the University of California, Berkeley. His fields of interest are behavioral economics and finance, law and economics, political economy, and corporate finance. His recent work focuses on the effects of government intervention in lending market, including mortgages and corporate loans. Before completing his graduate studies, he held visiting positions at the University of Warwick and the University of Chicago. He holds a MSc. in Economics and Business Law from Tor Vergata University (Rome).
Alberto Rossi is an Assistant Professor of Finance at the Smith School of Business, University of Maryland at College Park. His research interests include theoretical and empirical asset pricing, asset management and household finance. His recent work concentrates on networks, institutional investors’ performance, and the risk-return trade-off in financial markets. He also studies the effect of regulation on mortgage lending. Professor Rossi’s work has been published in leading academic journals such as the Journal of Finance, the Review of Financial Studies, and the Journal of Financial Economics. His teaching interests include econometrics, investments and asset pricing. Before joining the Smith School, he worked as an economist at the Board of Governors of the Federal Reserve System in Washington DC. He received his PhD in Economics from the University of California, San Diego.
We analyze the effects of a recent piece of financial regulation – Dodd-Frank – on mortgage origina- tions. Dodd-Frank aimed at reducing mortgage fees and abuses against vulnerable borrowers, but also increased the costs of originating mortgages. We find it triggered a substantial redistribution of credit from middle-class households to wealthy households. Lenders reduced credit to middle-class households by 15%, and increased credit to wealthy households by 21%, after controlling for drivers of the demand for housing, local house prices, and foreclosures. Credit to low-income households was unaffected. Large lenders found reacting to Dodd-Frank to be less costly. We thus instrument house- holds’ exposure to Dodd-Frank with the pre-crisis share of mortgages originated by large lenders in each county. We find that – even though counties with small and large lenders are similar in terms of observable characteristics – the redistribution of credit from the middle class to the wealthy was higher in counties more exposed to large lenders. Results hold at the individual-loan level and zip- code level, at the intensive margin (amount lent) and extensive margin (number of loans originated), and for accepted and rejected loans. The collapse of the private-label securitization market, banks’ risk-management concerns, wealth polarization after the crisis, and pre-crisis indebtment do not explain the results.
Gary R. Mottola is the Research Director of the FINRA Investor Education Foundation and a social psychologist with over 20 years of research experience, much of which was spent in the financial services industry. In his role at FINRA, he oversees and conducts research projects aimed at better understanding financial capability in America, protecting investors from financial fraud, and improving financial disclosure statements. Dr. Mottola received his B.A. from the University at Albany, his M.A. from Brooklyn College and his Ph.D. from the University of Delaware. He was a visiting scholar at Wharton in 2006 and is an adjunct professor of statistics in Villanova University’s Economics Department.
The National Financial Capability Study (NFCS) is designed to measure perceptions, attitudes, experiences, and behaviors on a wide variety of topics. The largest component of the NFCS, the State-by-State Survey, is conducted across a large, diverse sample in order to provide a comprehensive analysis of the financial capability of the national population as a whole. As such, the breadth of subject areas covered in the State-by-State Survey necessarily limits the depth to which any individual subject can be explored, particularly in areas such as investing outside of retirement accounts, which applies to only a minority of the population. To provide more insight on investing decisions, a separate follow-up survey of investors was conducted as part of the 2015 NFCS. The Investor Survey explores topics such as relationships with investment brokers and advisors, understanding and perceptions of fees charged for investment services, usage of investment information sources, attitudes towards investing in general, and investor literacy.
This report outlines findings from the 2015 Investor Survey, an online survey conducted among a sample of 2,000 respondents who completed the 2015 State-by-State Survey and indicated that they have investments held in non-retirement accounts. A large majority of these respondents (87%) also have investments in retirement accounts, though retirement investments are not specifically addressed in the survey.
George Washington University School of Business
Duquès Hall, Room 651
George Washington University School of Business
Duquès Hall, Room 651
George Washington University School of Business
Duquès Hall, Room 651
George Washington University School of Business
Duquès Hall, Room 651
George Washington University School of Business
Duquès Hall, Room 651
George Washington University School of Business
Duquès Hall, Room 650