http://repub.eur.nl/res/aut/27581/ List of Publications en http://repub.eur.nl/static-eur/img/logo.png http://repub.eur.nl http://repub.eur.nl/res/pub/30585/ 2011-12-01T00:00:00Z Customer First is an important issue of the recently introduced banking code in the Netherlands. It mainly concerns customer satisfaction and it is aimed at regaining trust of customers. Interestingly, the code does not address the urgency of improving customers’ financial literacy and their ability to make sound financial decisions, given that they consult a financial advisor. This dissertation specifically considers these two topics. In the first chapters we present empirical results about the sheer size of consumer debts and about the difficulties that consumers have with interest rate computations. With newly acquired data, we also document that the willingness to purchase on credit gets reduced when the total amount involved is mentioned explicitly. As consumers apparently need help, many turn to financial advisors. The second part of this dissertation deals with an extensive survey amongst financial advisors and their customers. This unique database could be compiled with the help of two Netherlands-based financial institutions. We address the perceived expertise of the advisor and the advisee, the satisfaction levels and the relevance of the disclosure of the advisor’s fee. We also contrast the answers of advisors and consumers and we document a substantial difference in opinions about the same topics. http://repub.eur.nl/res/pub/22234/ 2011-01-24T00:00:00Z Consumers often have to make decisions involving computations with interest rates. It is well known from the literature that computations with percentages and thus with interest rates amount to a difficult task. We survey a large group of consumers, and we find that questions on interest rates are answered correctly in about 20% of the cases, which in our setting amounts to a random choice. Additional to the available literature, we also document that consumers are too optimistic in the sense that they believe loans are paid off sooner than is true, which provides empirical evidence of self-serving bias. We further find that optimism can be reduced by increasing the monthly payments. The results are robust to corrections for general numeracy. http://repub.eur.nl/res/pub/22235/ 2011-01-24T00:00:00Z Consumers have substantial debts. Examples concern mortgages but also debts for products such as clothing and books. Facing difficulties when dealing with interest rates and percentages computations is one of the reasons for those debts. Campaigns like “Borrowing money costs money” should make consumers aware of the consequences of borrowing money. We argue that the campaign would be more effective if the actual size of the debt is mentioned in monetary terms. We support our argument using experimental data.