Finance
FINANCIAL ADVICE, LITERACY, INCLUSION
AND RISK TOLERANCE: THE MODERATING
EFFECT OF UNCERTAINTY AVOIDANCE
Gentjan Çera1, Khurram Ajaz Khan2, Zuzana Rowland3,
Humberto Nuno Rito Ribeiro4
1
2
3
4
Tomas Bata University in Zlín, Faculty of Management and Economic, Czech Republic, ORCID: 0000-0002-9324-181X,
cera@utb.cz;
Tomas Bata University in Zlín, Faculty of Management and Economic, Czech Republic, khan@utb.cz;
Institute of Technology and Business in České Budějovice, School of Expertness and Valuation, Czech Republic,
ORCID: 0000-0002-7792-8873, rowland@mail.vstecb.cz;
University of Aveiro, ESTGA & GOVCOPP, Portugal, hnr@ua.pt.
Abstract: The aim of this paper is to investigate the determinants of financial advice with a special
focus on the cultural role in the influence of risk tolerance on seeking advice for financial issues.
Financial literacy is covered by financial attitude, behaviour and knowledge. Financial inclusion
is the other factor considered in the conceptual framework, as an indicator which can enhance
both financial behaviour and financial advice. The research is based on primary data collected
in two European nations, manifesting differences in culture, which gives the possibility to test the
uncertainty avoidance role in the above relationship. This particular focus is the novelty of this
work, as it sheds light on the importance of culture while designing policies with the aim to enhance
individuals’ financial literacy and advice. The hypotheses are tested by using Partial Least SquareStructural Equation Modelling (PLS-SEM) method. It was found that financial behaviour improves
as financial inclusion gets better, along with financial attitude and knowledge. Furthermore, financial
advice is positively influenced by financial inclusion and risk tolerance and partly by financial literacy.
Additionally, findings demonstrate that culture does matter in explaining differences between
countries. Culture in this paper is represented by uncertainty avoidance, as one of the Hofstede’s
culture dimension. Individuals from countries that manifest a very high preference for avoiding
uncertainty reflect a negative relationship between risk tolerance and financial advice. The paper
offers useful insights for policymakers and industry leaders in understanding the most influential
factors on financial advice. This enables them to scheme policies and services aimed at equipping
citizens with knowledge and skills to make the best use of their financial resources.
Keywords: Financial advice, financial inclusion, financial literacy, risk tolerance, culture.
JEL Classification: G53, D91.
APA Style Citation: Çera, G., Khan, K. A., Rowland, Z., & Ribeiro, H. N. R. (2021). Financial
Advice, Literacy, Inclusion and Risk Tolerance: The Moderating Effect of Uncertainty Avoidance.
E&M Economics and Management, 24(4), 105–123. https://doi.org/10.15240/tul/001/2021-4-007
Introduction
Not everyone has enough skills and abilities
to tackle complex financial markets and make
prudent financial decisions in uncommon
situations. People worldwide have been
using paid and unpaid sources for advice
from someone they trust to overcome them.
10.15240/tul/001/2021-4-007
Numerous studies have witnessed fruitful
results from financial advisors in financial
planning, such as retirement planning and
wealth creation (Irving, 2012; Stolper & Walter,
2017). The current issues, such as complexities
of the financial market and difficulties arising out
of the economic crisis, are becoming worrisome
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(Crotty, 2009; Taylor, 2011; Xiao & O’Neill,
2016). The volatile economic environment and
the problems of retirement financial security
(Wang & Shi, 2014) add to its severity. The
most important of all is to know how to make
a prudent economic decision in financial
aspects (Lusardi & Mitchell, 2014). The suffering
resulting from the likelihood of losing money
due to erroneous financial conclusions leads to
financial anxiety (Cwynar et al., 2020). These
issues are now becoming significant financial
hurdles and trap individuals in economic losses
through their unwise investment plans or poor
debt management and frequently happens
throughout the regions. It may be due to low
financial literacy, as people lack financial literacy
worldwide (Klapper et al., 2014). Therefore, to
protect themselves from economic volatility and
make prudent financial decisions, individuals
may have two options only: either improve
their financial literacy or look-out for someone’s
financial advice. It means someone else takes
the financial decision on their behalf (Amaral &
Kolsarici, 2020; Yoong & Hung, 2010).
Comparatively, financial advice can be avail
easily, but developing financial literacy might be
a long-term process and required lots of effort
at the individual, government, and institutional
levels. Therefore, financial advice seems
a quick way out (Karabulut, 2012). However,
now the question arises who will prefer financial
advice, the one who has low or high financial
literacy prefers high risk. There seems a need
to determine the factors affecting financial
advice, the key factors that push individuals
towards financial advice. Hence the focus of
the present study is to investigate the factors
affecting financial advice-seeking behaviour.
Since studies already found, individuals in
developed countries prefer to take financial
advice and draw their benefits (Stolper & Walter,
2017). But why only in developed countries?
It is because people in developed countries
have higher financial literacy than emerging
economics (Klapper et al., 2015). Displaying
higher financial literacy might be a positive
reason for seeking financial advice. However,
this phenomenon is not much explored yet in
other parts of the world except the USA and
a few other countries (Stolper & Walter, 2017).
The existing literature reveals a lot about
financial literacy and financial advice, but it is
limited regarding how financial literacy can
affect financial advice. The mixed connection
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between financial literacy and financial advice
fails to bring out conclusive evidence to
demarcate who prefers financial advice: one
with higher or low financial literacy. It was found
that the need for financial advice is more when
the actual financial literacy level is low (Allgood
& Walstad, 2016; Khan et al., 2019; Yoong &
Hung, 2010). In those cases, financial advice
proved to be helpful to make better financial
decisions (Liu et al., 2019). In its support, quite
a few studies state that individuals with better
confidence in their financial literacy have less
chance to seek financial advice (Kramer, 2016).
On its contrary, several studies support and
claimed that people with better financial literacy
have higher chances of seeking financial advice
(Calcagno & Monticone, 2015; Chauhan & Dey,
2020; Collins, 2012; Cwynar et al., 2020; Pan et
al., 2020). These mixed outcomes reveal a gap
and give the present study the scope of how
financial literacy can affect financial advice.
Researchers explain financial literacy that is
made of three components financial behaviour,
financial attitude, and financial knowledge
(Agarwalla et al., 2015; Atkinson & Messy,
2012; Çera, Khan, Mlouk, et al., 2020; Garg &
Singh, 2018; Huston, 2010; Potrich et al., 2015,
2018; Santini et al., 2019). Supporting the role
of financial literacy components, a few studies
indicate that better results can be achieved from
advice for those with less financial knowledge
(Moreland, 2018; Nguyen & Rozsa, 2019),
which reflects the positive impact of financial
knowledge on financial advice (Cliff et al.,
2012). Since limited studies have investigated
how each component of financial literacy
affects financial advice individually, the present
study’s first objective is to examine the effect
of financial behaviour, financial attitude, and
financial knowledge on financial advice.
Another identified key factor is financial
inclusion, which might affect financial advice.
Financial institutions’ advisory services can
help their customers obtain better results
(Hermansson, 2015), indicating the close
connection between financial inclusion and
financial advice. In England, financial inclusion
is a part of the financial capability strategy to
increase financial services access to promote
financial advice among deprived segments
(Atkinson & Messy, 2013). It was also traced
that improving financial inclusion through
digital finance can strengthen the relationship
between service providers and users (Ozili,
Finance
2018). Being financially inclusive does affect
individuals’ financial advice? The literature
signals a close connection between financial
inclusion and financial advice has become
part of the financial system that can open
doors for the financial advisory. However, the
studies in this regard are not enough to reveal
financial inclusion’s impact on financial advice.
Thus, another objective of the present study to
determine the impact of financial inclusion on
financial advice.
Another key closed looking aspect is
risk tolerance. Based on the concept of an
individual’s risk preferences, does it affect an
individual’s financial advice-seeking behaviour?
Studies state that risk tolerance is a crucial
topic in financial planning (Amaral & Kolsarici,
2020; Hanna et al., 2011). Financial planners
are the one who gives financial advice and
evaluates the clients risk tolerance level (Callan
& Johnson, 2002). Humans cannot process
all the information rationally, and emotions
influence their decisions (Lerner et al., 2004).
Due to this relationship, they may fail to make
optimal financial decisions. Trust in advice is
closely connected with an individual’s risk-taking
willingness. Trust is an important determinant
of financial advice-seeking behaviour (Tang
& Lachance, 2012). Financial advice is given
based on assessing and understanding the
individuals’ risk tolerance level (Callan &
Johnson, 2002). It means, when an individual
cannot assess his risk tolerance level, he or
she might need financial advice, or those who
are willing to take high risk may need financial
advice and likewise. All these signals that an
individual’s risk tolerance may affect financial
advice. In this regard, it becomes imperative
to investigate the impact of risk tolerance on
financial advice.
Everything exists in an environment, so as
a human being, and every individual belongs
to a culture. Studies found that there is a link
between culture, money, and risk tolerance
(Henchoz et al., 2019; Statman, 2010).
Culture has a substantial influence on people’s
judgment and decision making, which cannot
be ignored. Culture affects how people behave
and how they think, how they convey views
about others and the environment. Above all,
how individuals assess and choose between
various alternatives (Odongo, 2016) whether
to choose financial advice or not. A collective
society may prefer advice from others, but
on its contrary individualistic may not or less
(LeFebvre & Franke, 2013). Therefore, culture
might influence the individual’s risk tolerance
and financial advice seeking choice.
A thorough understanding of the prevailing
market conditions is crucial for making the right
financial product choice and minimising loss
(Braunstein & Welch, 2002). Hence, seeking
competent financial advice before selecting
any financial product is always a good option
(Stolper & Walter, 2017). Studies have tried to
showcase the role of financial literacy regarding
financial advice (Calcagno & Monticone,
2015; Kramer, 2016; Pan et al., 2020; Přívara
& Kiner, 2020; Stolper & Walter, 2017; Von
Gaudecker, 2015). Individuals may prefer
financial advice to take the calculated risk since
good financial advice plays a significant role
in bringing financial stability and well-being. It
also improves financial satisfaction (Winchester
& Huston, 2015) because consumers prefer
financial advice services because of their
known psychological and financial benefits
(Westermann et al., 2020). So much has been
covered so far, but no prior study, to the extent
of the authors’ knowledge, has covered financial
literacy components, financial inclusion, and
risk tolerance along with culture effect in an
integrated framework to determine its impact
on financial advice.
The critical contribution of the present study
is to investigate the determinants of financial
advice. Explored the factors which are not
addressed yet as a determinant of the financial
advice. The present study’s concentration is
on Europe’s emerging economies since most
financial advice studies have been conducted
in the USA and are very limited in Europe
(Stolper & Walter, 2017). Also, individuals in
European countries are turning up for advice
towards financial intermediaries because they
are the critical source of financial information
(Calcagno & Monticone, 2015). The present
study can be informative for financial advisors,
government agencies, and financial service
providers to develop effective strategies to
support consumer financial planning, safeguard
from financial threats and investment decisions.
1. Literature Review
From routine financial decisions, the smallest
to long term financial retirement planning
decisions, the whole story revolves around
how an intelligent financial decision can be
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made. Financial decision making determines
individuals’ gain, loss, financial security, stability,
and failure. Nobody prefers financial loss, failure,
and instability. Shreds of literature reveal that
financial advice is getting considerable attention
in current years (Chauhan & Dey, 2020; Khan &
Akhtar, 2020; Moreland, 2018; Stolper, 2018;
Stolper & Walter, 2017; Von Gaudecker, 2015;
Worimegbe et al., 2020). It was found that
financial advice can help to advance and polish
individuals’ financial decision making (Kim
et al., 2018). Many individuals pursue expert
advice for financial decision-making. In return, it
reflects its usefulness (Stolper & Walter, 2017).
The previous studies found mixed results on
who prefers financial advice attract further
investigation and the growing importance
of financial advice and its role in improving
individuals’ financial performance (Lusardi &
Mitchell, 2014). Studies indicate that financially
capable
individuals,
must-have
advice,
and guidance to achieve financial stability
(Sherraden et al., 2015). The importance of
financial advice matters even more where there
is a low level of financial ability (Georgarakos
& Inderst, 2011) that prevails in many parts of
the world. Hence, in order to understand what
attracts and affects individuals to use financial
advice. The study links how financial behaviour,
financial
knowledge,
financial
attitude,
financial inclusion, and risk tolerance positively
encourage individuals for financial advice in
a specific cultural environment.
1.1 Hypotheses Development
Financial attitude, financial knowledge, and
financial behavior are the essential components
of financial literacy (Atkinson & Messy, 2012;
Belás et al., 2016; Fernandes et al., 2014;
Lusardi & Mitchell, 2014; OECD, 2013; Potrich
et al., 2015). Individuals with a higher level of
financial literacy recognise the value of financial
advice (Calcagno & Monticone, 2015; Chauhan
& Dey, 2020; Collins, 2012; Cwynar et al., 2020;
Pan et al., 2020). It indicates that financial
literacy elements positively impact financial
advice. Financial decision making is always
critical for any individual because it requires
financial knowledge, the right financial attitude,
and favourable financial behavior. Generally,
the lack of adequate financial literacy is
a significant problem worldwide (Klapper et al.,
2015) to make wise financial choices. Moreover,
not sound financial decision making can bring
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financial havoc and erase all hard-earned and
saved money. Since higher financial literacy
is favourable for financial advice-seeking and
improvement in financial decision making, it
reflects its positive effect on financial adviceseeking behaviour. Besides, the countries’
financial regulations also encourage financial
entities to give their clients financial advice and
bring them under the financial system’s ambit
through various financial literacy enhancement
programs. These programs can also influence
the attitude, knowledge, and behaviour of
individuals towards financial advice.
Financial advice is an easy and quick option
for an immediate solution (Karabulut, 2012)
to avoid above mentioned situations. Since
financial advice includes comparing risk and
returns on financial assets; therefore, a certain
amount of financial literacy is required (Pan et
al., 2020). The individuals either must improve
their financial literacy or use financial advice
as a substitute. Either an individual learns
and promotes his/her financial proficiency or
can avail advice for better financial decisions,
and dogged the efforts to be taken for learning
(Calcagno & Monticone, 2015). Financial advice
is about delegation of trust in advisors’ services
who can make better financial decisions.
Instead of stressing enhancing financial
education to improve financial decision making,
financial advice can be an alternative way to
enhance quality financial decisions (Stolper
& Walter, 2017). Prior studies found that
financial advice improves financial decisions
(Collins, 2012; Kim et al., 2018; Moreland,
2018; Westermann et al., 2020). Since it is the
choice of an individual to look-out for financial
advice, it depends on an individual’s financial
attitude, behaviour, and knowledge. Studies
support with their findings that seeking financial
advice is related to financial attitude and
individual behaviour (Moreland, 2018). To build
an individual’s financial ability, individuals musthave advice and guidance to plan and make
steady financial decisions (Sherraden et al.,
2015). This fact highlights the role of financial
literacy components in financial advice, which
cannot be ignored.
Attitude is about the individuals’ willingness
to undertake any particular action about a task,
to do or not. It is a belief behind the individuals’
motivation to take a specific action (Ajzen,
1991). The individuals always assess their
behaviour outcomes, and that assessment
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forms the individuals’ attitudes (Yong et al.,
2018). Financial attitude can be understood as
an individual leaning towards financial matters.
Financial attitude is an individual’s way of
approaching financial issues and decisionmaking (Rai et al., 2019). It concerns an
individual’s opinion and mindset, how people
manage their financial affairs and make financial
decisions. It is about the mindset, opinion, and
judgments that form the attitude and are related
to the human mindset. That is why it affects
individuals’ financial decision-making (Arifin,
2018). Financial attitude is related to individuals’
economic beliefs. Interestingly, others’ opinions
can influence individual decision making, as
well. Advisors’ advice can help decision-makers
regarding the unattended substitutions and
unintentional consequences (Yaniv, 2004).
Positive financial advice can make a better
financial decision, and it might also develop
a positive financial attitude towards financial
advice. Besides this, an individual’s attitude
can determine an individual’s acceptance and
willingness of financial advice.
The second component of financial literacy
is behaviour. The theory of planned behaviour
explains that attitude results in behaviour
formation (Ajzen, 1991). There is a close
association between attitude and behaviour.
Various scholarly articles indicate that financial
attitude is crucial in comprehending individuals’
financial behavior (Castro-González et al.,
2020; Vieira et al., 2019; Yap et al., 2018; Yong
et al., 2018). Being one of the influential of the
individuals’ financial behavior, the financial
attitude has a considerable impact on financial
decision making (Robb & Woodyard, 2011;
Yap et al., 2018). Subsequently, the indication
from studies also exposes that changing selfbeliefs is associated with changing financial
behaviours (Serido et al., 2013), reflecting
the role of financial attitude. Other studies
reinforce this association and find attitudes and
behaviours linked to each other (Joo & Grable,
2004; Sample & Warland, 2018) and financial
attitude has a positive linkage with financial
behaviour (Fünfgeld & Wang, 2009; Glasman &
Albarracín, 2006; Vieira et al., 2019).
Furthermore, the researchers give much
importance to understanding individuals’
financial behaviour since it is critical to individuals’
financial planning (Lusardi & Mitchelli, 2007).
Consumers’ behavioural factors influence the
choice of different financial services (Beckett et
al., 2000), and these behavioural factors might
affect the choice of financial advisory services
as well. Rational financial behaviour has
a positive effect on financial advice. However,
in changing situations, complex economic
circumstances, and the dynamic environment,
it is worth examining how financial literacy
elements affect financial advice in the interval
of times. Hence based on the discussion, the
following hypotheses have been framed:
H1a: Financial attitude positively affects
financial behaviour.
H1b: Financial attitude positively affects
financial advice.
H2: Financial behaviour positively affects
financial advice.
An individual’s financial knowledge is
a crucial component for improved financial
decision making. Existing literature reveals that
financial knowledge is about understanding
basic financial concepts (Huston, 2010).
Evidence also exposed a strong link between
the individuals’ financial knowledge and financial
practices. It empowers individuals to schedule
their payment commitments, emergency
savings funds, make judicious investments, and
set optimal financial goals (Chu et al., 2017;
Randáková & Bokšová, 2016; Shkvarchuk &
Slav’yuk, 2019). Further delving reveals that
financial knowledge affects individuals’ financial
behaviour and decision-making, and they are
associated with each other (Allgood & Walstad,
2016; Kalmi, 2018) in both long term and short
term horizons (Henager & Cude, 2019; Kim
et al., 2019; Zamir, 2019). The discussion
establishes a reasonable connection between
financial knowledge and financial behaviour.
Another relation to examining is how financial
knowledge affects financial advice. Since the
previously found mixed results from the studies
indicate that both categories of individuals who
are good at financial literacy and those who
have low financial literacy seek financial advice.
This discussion gives insight that financial
advice is needed in all situations. Whether an
individual has higher/lower financial literacy
seeks financial advice. Being part of financial
literacy, financial knowledge may have a direct
effect on financial advice. Financial knowledge,
either subjective or objective, are positively
related to financial advice usage, precisely
regarding saving and investing, insurance and
tax planning, and many more (Cliff et al., 2012).
The current challenges of financial markets,
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such as its complex system and complexities
in products and services, so on, have made
the financial advice necessary for individuals’
decision-making.
H3a: Financial knowledge positively affects
financial behaviour.
H3b: Financial knowledge positively affects
financial advice.
Financial literacy gives individuals the
ability to make favourable financial decisions.
However, internal ability alone may not be
enough (Johnson & Sherraden, 2007). An
individual needs external opportunity, as
well. One such opportunity is to be financially
inclusive (Johnson & Sherraden, 2007;
Sherraden & Ansong, 2016) to bring individuals
under the financial system’s ambit. Organisation
for Economic Corporation and Development
(OECD, 2013) explains that financial inclusion
concerns the level of awareness, availability,
and accessibility of financial products and
services to individuals. People must have the
opportunity to avail themselves of financial
services easily and conveniently. Poor financial
inclusion restricts individuals from reaching
and avail financial services required for saving,
investment, and long-term planning. Studies
explain that financial inclusion happens when an
individual can have timely, cost-effective, easily
accessible, safe, easy to use and, of course,
reliable financial services, leading to financial
inclusion (Aprea et al., 2016; Sherraden, 2013).
Enhanced financial inclusion improves people’s
ability to make better investment decisions and
safeguard from market risks. It was also found
that financial inclusion positively improves
individuals’ savings because it gives easy
access to banking services (Kempson et al.,
2013).
Financial inclusion empowers individuals
to get financial services easily accessible. This
easiness supports individuals in their financial
planning and decision-making because of its
accessibility and availability. Previous studies
found that financial inclusion helps individuals in
asset accumulation (Reyers, 2019). Availability
and accessibility of financial services equip
individuals to look for the best possible financial
services for making the most appropriate
financial and retirement plans. A recent study
found that access and quality of financial
inclusion are among the features that affect
individuals’ household and debt behaviour
(Riau, 2019). Therefore, examining the impact
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of financial inclusion on financial behaviour will
give a new insight.
Financial
services
accessibility
and
availability help individuals utilise the financial
service for their financial planning, savings,
and investments for both short-term and longterm goals. It has been found that advice
plays a vital role in retailing financial services,
such as mortgages, investments, and many
more (Inderst & Ottaviani, 2012). Many times,
for consumers, it is not easy to comprehend
complex financial products. In those cases,
financial advice can play an essential role in
financial services retailing (Inderst & Ottaviani,
2012). Therefore, there seems a link between
financial inclusion and financial advice. An
individual’s anxiety towards financial consultant
support need is based on the level of knowledge
they have about financial planning practices
(Gerrans & Hershey, 2014). Therefore, it might
be possible that people may approach towards
financial service providers to seek advice too.
Since financial inclusion and financial advice
are part of the financial system, somehow,
financial advice and financial inclusion are
also related, as financial advice comes from
financial inclusion. Also, the countries’ financial
regulations encourage financial entities to
give financial advice to their clients, bring
them under the ambit of the financial system
through various financial literacy enhancement
programs, technically called financial inclusion.
These regulations can also influence the
behaviour of individuals and financial advice.
The outcomes will add to the limited available
literature on financial inclusion and financial
advice. Based on the above discussion, the
following hypothesis has been framed as to
whether financial inclusion positively affects
financial advice.
H4a: Financial inclusion positively affects
financial behaviour.
H4b: Financial inclusion positively affects
financial advice.
Financial advice has to do with making
better investment choices, saves time and
does risk and return trade-off to minimise risk
and maximise return. The fundamental concept
states high returns from high risk, but this is
complicated. To handle complications, one may
prefer financial advice. Financial risk tolerance
is a weighty issue and a significant factor in
several financial decisions (Grable, 1999; Matis
et al., 2013). Risk tolerance is the amount of
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risk a person is willing to accept (Callan &
Johnson, 2002). Evaluation of financial risk
and how much risk the individuals are willing to
take is an essential exercise before making any
financial decisions as it affects the risk of losing
money and returns. Studies found a positive
connection between investment decisions and
individuals’ risk tolerance and customer trust
and relationship trust in the services, have
a positive association with customer level of
financial literacy and risk tolerance (Nguyen et
al., 2016). Higher risk preferences raise higher
anticipation for wealth build-up. A readiness to
take risks is supposed to be a requirement for
accruing wealth (Yao et al., 2005). However,
there is a likelihood that wealth may decline
if an individual mishandles her/his financial
environment (Grable & Roszkowski, 2008).
To avoid loss and enhance the fund’s returns
and safety, an individual may prefer financial
advice to have calculated risk. This fact reflects
a connection between the financial advisor
and customer risk tolerance. A study recently
found a significant relation between individual’s
level of risk tolerance and propensity to seek
financial advice. It explains that if individuals
have a higher risk tolerance level, they have
a higher chance of looking out for financial
advice (Amaral & Kolsarici, 2020). Whether
individuals prefer financial advice when they are
willing to take a high risk or have minimal risk
has not received much attention yet. However,
it seems radical to be explored to understand
how an individual’s risk tolerance can affect
individual financial advice.
H5: Risk tolerance positively affects
financial advice.
1.2 Moderating Effect of Uncertainty
Avoidance
Culture is a collective phenomenon, as it is at
least partially shared with those who live or lived
in the same social environment where it was
learned (Hofstede et al., 2010). The collective
programming of the mind discriminates
followers of one group or type of people from
others. It means people from two different
cultures may have a different mindset, different
behaviour, and personality trait. Mueller and
Thomas (2001) explained that culture is the
basic system of values specific to a particular
group or community, influences personality
traits, and develops specific behaviour in the
individuals. Since the entire system of values
is unique to a specific group or society affects
particular personality traits development and
stimulates individuals to engage in behaviours.
Culture not only explains the similarities but
also identifies the contrasts in behaviour (Smith
et al., 2002). It signals that there could be
similarities and dissimilarities between cultures,
and the contrast between them will be an
excellent scale to understand them individually.
According to Hofstede et al. (2010), different
nations reflect different cultures, and they can
classify into a distinct group the base of different
dimensions. The present study examined the
moderating role of culture in the relationship
between risk tolerance and financial advice.
The present study assumed that the
relationship between risk tolerance and financial
advice is jointly affected by two major cultural
factors, explicitly, individualism-collectivism and
uncertainty avoidance (Hofstede & Hofstede,
1991). When it comes to analysing trust and
risk preference, based on society orientation
towards certainty preferences, uncertainty
avoidance is considered as moderator by many
studies on the society orientation (Çera, Khan,
Belas, et al., 2020; Jang et al., 2018). According
to Hofstede et al. (2010), uncertainty avoidance
refers to the extent to which the members of
a culture feel threatened by vague or indefinite
circumstances. It is about the ambiguity
which makes the individuals susceptible.
High uncertainty avoidance cultures dodge
ambiguous situations and reflect a lower
tolerance towards uncertainty than individuals in
low uncertainty avoidance cultures. Individuals
in such cultures look for more certainty, which
can make actions interpretable and expectable.
People from low uncertainty avoidance cultures
reflect lower anxiety, controlled emotions,
relatively more comfortable with ambiguity, more
tolerant of diversity, and more open to seeking
novelty and convenience, and the people in
high uncertainty avoidance have opposites
features (Hofstede, 2001). Hofstede (2001)
also stresses that uncertainty leads to risk
and anxiety, leading to fear, differentiated that
UA is different from risk avoidance. Therefore,
uncertainty avoidance is distinguished from
risk avoidance, which indicates that the low
uncertainty avoidant individuals might prefer
a higher risk option to lessen their uncertainty
and vice-versa. In support of the present
study, tangible supports can be found from the
studies, indicating that uncertainty negatively
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affects risk-taking (Kreiser et al., 2010). Further
supported by Statman (2010), high uncertainty
avoidance has a lower risk tolerance than lower
uncertainty avoidance nations. Also, socioeconomic and demographics influence the risk
tolerance levels (Jeong & Hanna, 2004), which
are part of society and culture. Therefore:
H6: The relationship between risk tolerance
and financial advice is weaker in countries with
high uncertainty avoidance.
Since uncertainty avoidance is a concern
with the degree of certainty preference, how
much risk individuals are willing to tolerate, their
preference of certainty over uncertainty, and
how much control they prefer over uncertain
future events. Consider the cultural difference
between Poland and Spain, where Poland
reflects higher uncertainty avoidance compare
to Spain. Hence, one with lower risk avoidance
may prefer financial advice, and the other may
take more risk without much guidance from the
advisors. Countries from the west and the east
reflect many dissimilarities. Hence, it would
be logical to examine the moderating effect of
uncertainty avoidance. Therefore, to understand
the influence of culture on risk tolerance’s effect
on financial advice, the uncertainty avoidance
dimension has been chosen.
Fig. 1:
2. Methods and Procedures
To test the proposed conceptual framework,
a questionnaire was initially designed mainly
based on the National Financial Capability
Study (NFCS) (FINRA, 2012). Before the data
collection, a pilot test was done. The data were
collected during June and July 2019. To get to
the respondents, university alumni databases
were used (the University of Huelva in Spain and
the University of Warsaw in Poland). An email
was sent to alumni students asking to provide
the contacts of a family member who recently
had a birthday. A link of the questionnaire was
then sent to this family member asking him/her
to fill it in. All in all, 402 valid questionnaires
were collected, which is above the minimum
sample size (Bagozzi & Yi, 2012). Tab. 1 shows
the profile of the sample.
The research was done in two countries
because one of the aims was to capture the
effect of culture on the relationship between
risk tolerance and financial advice. Based on
the literature review, uncertainty avoidance
may moderate this association. Therefore, the
above relationship can be tested by comparing
countries that manifest differences in culture
(Hofstede et al., 2010). Poland and Spain are
two countries with different levels in cultural
dimensions, although being part of the Europe
Theoretical model
Source: own
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Finance
Tab. 1:
Sample profile
Variable
Poland
(n = 200)
Category
Gender
Female
Age
Mean (standard deviation)
Region
Spain
(n = 202)
Total
(n = 402)
57.5%
70.3%
63.9%
26.8 (7.31)
28.6 (6.75)
27.7 (7.08)
North
18.0%
32.7%
25.4%
Central
21.5%
15.5%
18.4%
Capital city
10.0%
9.9%
9.9%
South
20.0%
24.3%
22.2%
East
19.5%
5.9%
12.7%
West
11.0%
11.9%
11.4%
53%
79%
66%
Leaving
settlement
Urban area
47%
21%
34%
Income
Up to 900 EUR (2,000 PLN)
27.0%
28.2%
27.6%
900–1,500 EUR (2,000–4,000 PLN)
51.5%
24.8%
38.1%
1,500–2,000 EUR (4,000–7,500 PLN)
17.0%
36.1%
26.6%
Above 2,000 EUR (7,500 PLN)
4.5%
10.9%
7.7%
Rural area
Source: own
Union and dominance of Roman Catholic
believers. Poland has a very high preference for
avoiding uncertainty as its score on uncertainty
avoidance is 93, while Spain scores 86 on the
same dimension.
All constructs were measured as selfreported, and they are summarised in Tab. 2.
Each of the proposed constructs’ items was
a five-point Likert-type scale (1 = strongly
Tab. 2:
disagree, 5 = strongly agree). In addition, Tab. 2
reports the measurement model for all variables
included in the conceptual framework. The lowest
Cronbach’s alpha was found 0.784 (financial
inclusion), which is well above the standard
threshold of 0.70, meaning sound scale reliability.
All items loadings were reported above 0.70,
and there was no multicollinearity since the VIF
coefficients were lower than the critical value of 3.
Measurement model – Part 1
Statements per each construct
LO
VIF
It is important to set goals for the future.
0.793
1.550
I pay my bills on time.
0.752
1.515
I keep a close personal watch on my financial affairs.
0.849
1.932
I am prepared to risk some of my own money when saving or making an investment.
0.726
1.448
Financial attitude (CA = 0.786; CR = 0.862) Source: Atkinson & Messy, 2011
Financial advice (CA = 0.812; CR = 0.869) Source: FINRA, 2012
I think financial advice is helpful.
0.725
1.507
I consider the other’s opinions in decision making (buying, investing, savings,
borrowings, etc).
0.789
1.755
Consultation is essential in dealing with financial issues.
0.767
1.626
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113
Finance
Tab. 2:
Measurement model – Part 2
I think financial advice will help me to achieve financial expectations in a better way
than an alone decision.
0.776
1.740
I would trust financial professionals and accept what they recommend.
0.719
1.554
Financial behaviour (CA = 0.842; CR = 0.884) Source: Joo & Grable, 2000; and Potrich et al., 2016
I take notes and control my personal expenses (e.g., expense and revenue spreadsheet).
0.751
1.621
I establish financial targets for the long term that influence the management of my
expenses.
0.718
1.550
I follow a weekly or monthly plan for expenses.
0.734
1.632
I compare prices when buying something.
0.713
1.593
I analyse my financial situation before a big purchase.
0.789
1.976
I have plans to achieve my financial goals (retirements, savings, investments, etc).
0.776
1.859
For me, banking services are still expensive [r].
0.774
1.337
I lack enough documentation to have a bank account [r].
0.760
1.620
One bank account is enough in my family [r].
0.807
1.778
I do not need financial services [r].
0.763
1.587
Financial inclusion (CA = 0.784; CR = 0.863) Source: Zins & Weill, 2016
Financial knowledge (CA = 0.793; CR = 0.866) Source: Robb & Woodyard, 2011; and Perry & Morris, 2005
Investing in different assets reduces risk.
0.793
1.542
An Investment with a high return is likely to be highly risky.
0.728
1.377
High inflation means that the cost of living is increasing rapidly.
0.814
1.843
If the price goes up rapidly, the money people have in saving accounts could lose
much of its value.
0.805
1.748
Risk tolerance (CA = 0.789; CR = 0.863) Source: Joo & Grable, 2004
In terms of investing, safety is more important than returns.
0.804
1.597
When I think of the word ‘risk’ the term ‘loss’ comes to mind immediately.
0.763
1.495
Making money from a risky investment is based on luck.
0.782
1.650
Investing is too difficult to understand.
0.780
1.668
Source: own
Note: LO = loading; CA = Cronbach’s alpha; CR = composite reliability; VIF = variance influence factor; [r] = reverse.
Excluding financial knowledge, all the
Heterotrait-Monotrait coefficients (Henseler et
al., 2015) were below the conservative threshold
of 0.85, indicating that all constructs were
distinct one from another. The HTMT coefficient
of financial knowledge is at the edge of the
above threshold. Given the importance of this
variable to the whole conceptual framework
and reflecting an HTMT coefficient very close
to the conservative threshold, it was decided
not to drop financial knowledge from the model.
Therefore, it was concluded that the discriminant
validity is established for this research.
114
2021, XXIV, 4
3. Results
Questionnaire design and Harman’s single
factor test were selected as two techniques
to investigate common method bias in the
research (Podsakoff et al., 2003). The title
for each set of items was not shown in the
questionnaire. According to Harman’s singlefactor test, a significant level of common
method variance exists when a single factor
emerges or captures more than 50% of the
variance (Podsakoff et al., 2003). The result
of the principal axis factoring showed that this
single factor explained 37.087% of the total
Finance
Tab. 3:
HTMT and correlation coefficients
FA
FAD
FB
FI
FK
RT
–
0.623
0.668
0.467
0.684
0.587
FAD
0.776
–
0.673
0.511
0.580
0.599
FB
0.813
0.809
–
0.520
0.650
0.660
FI
0.579
0.620
0.621
–
0.511
0.598
FK
0.860
0.718
0.786
0.632
–
0.568
RT
0.739
0.744
0.802
0.755
0.713
FA
–
Source: own
Note: Correlation coefficients are above the diagonal, while HTMT coefficients are below that. FA = financial attitude;
FK = financial knowledge; FB = financial behaviour; FI = financial inclusion; FAD = financial advice; RT = risk tolerance.
variance. Accordingly, there was no threat of
common method variance in this research.
To test the proposed conceptual model,
partial least squares structural equation
modelling (PLS-SEM) was performed (Hair
et al., 2017). PLS-SEM was used because
of the following reasons: firstly, the current
research requires latent variable scores to test
the relationships and, secondly, the composed
Tab. 4:
Hypotheses testing
Hypothesis
H1a
H3a
H4a
H1b
H2
H3b
H4b
H5
H6
variables were not normally distributed (Hair
et al., 2019). All composed variables were
formed using reflective indicators. PLS-SEM
was performed in SmartPLS 3.0 (Ringle et al.,
2015), with 5,000 iterations of resampling.
The results of PLS-SEM for the proposed
theoretical model are summarised in Tab. 4.
Besides the financial constructs, some individual
demographics were included in the model
Path
β
t
VIF
Supported?
FB ⟵ FA
0.378
7.454***
1.947
Yes
0.292
5.471***
2.063
Yes
FB ⟵ FI
0.195
4.510***
1.403
Yes
0.174
3.568***
2.494
Yes
FAD ⟵ FB
0.288
4.548***
2.590
Yes
FAD ⟵ FK
0.060
1.124
2.334
No
FAD ⟵ FI
0.117
2.461*
1.753
Yes
FAD ⟵ RT
0.166
2.650**
2.415
Yes
FB ⟵ FK
FAD ⟵ FA
−0.028
0.618
1.836
–
−0.087
1.979*
1.328
Yes
FAD ⟵ Education
0.052
1.366
1.163
–
0.065
1.484
1.371
–
FAD ⟵ Gender
0.045
1.238
1.063
–
FAD ⟵ Uncertainty avoidance
FAD ⟵ Uncertainty avoidance * RT
FAD ⟵ Income
Source: own
Note: FA = financial attitude; FK = financial knowledge; FB = financial behaviour; FI = financial inclusion; FAD = financial
advice; RT = risk tolerance; records from Poland are coded with 1, and those from Spain with 0; VIF = variance influence
factor; R square for FB = 0.543; R square for FAD = 0.562; *, **, *** refer to 95%, 99% and 99.9%, respectively.
4, XXIV, 2021
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Finance
as control variables to avoid potential causal
influence on financial advice. The model explains
54.3% and 56.2% of the variance in financial
behaviour and financial advice, respectively.
There were no multicollinearity issues since
none of the variables reflected a variance
influence factor higher than the threshold of 3.
The evidence supports the proposed
determinants of financial behaviour. Hence,
financial behaviour is positively affected
by financial attitude (β = 0.378; t = 7.454;
p < 0.001), financial knowledge (β = 0.292;
t = 5.471; p = 0.001) and financial inclusion
(β = 0.194; t = 4.510; p < 0.001) (see Tab. 4).
Therefore, H1a, H3a, and H4a were supported.
Regarding the determinants of financial
advice, it was found that, beside financial
knowledge, all other financial constructs
positively impacted financial advice (see
Tab. 4). Thus, financial advice is significantly
and positively affected by financial attitude
(β = 0.060, t = 1.124, p > 0.05) and financial
behaviour (β = 0.060; t = 1.124; p > 0.05), so
supporting H1b and H2. Moreover, financial
advice is positively influenced by financial
inclusion (β = 0.117; t = 2.461; p < 0.05) and
risk tolerance (β = 1.66; t = 2.650; p < 0.01).
These results fail to reject H4b and H5.
However, analysis demonstrates that financial
Fig. 2:
knowledge did not impact financial advice
(β = 0.060; t = 1.124; p > 0.05), leading to the
rejection of H3b.
This work also incorporates in its conceptual
model the moderating effect of uncertainty
avoidance on the relationship between risk
tolerance and financial advice. The moderating
effect was tested through PLS-SEM, and
its result is shown in Tab. 4. It was found
that uncertainty avoidance does statistically
moderates the above linkage (β = −0.087;
t = 1.979; p < 0.05). Thus, substantial evidence
was found in supporting the hypothesised
moderating role of uncertainty avoidance
in driving the influence of risk tolerance on
financial advice, H6.
Fig. 2 illustrates the moderating effect of
uncertainty avoidance on the effect of risk
tolerance on financial advice. As can be seen,
the two curves reflected not the same direction.
Moving from low to high-risk tolerance,
individuals from Poland reflected lower financial
advice. This result can be seen in the graph as
the slope of Poland’s curve is negative. On the
contrary, Spanish individuals show a slightly
tendency to increase financial advice as the risk
tolerance moves from low to high-risk tolerance.
Getting different results for the two countries in
this study shows the importance of uncertainty
avoidance’s moderating effect in this regard.
The moderating effect
Source: own
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2021, XXIV, 4
Finance
4. Discussion
The findings point to four main issues: financial
behaviour as a function of financial attitude,
knowledge and inclusion; the influence of
financial literacy (its components) on financial
advice; the effect of financial inclusion on
financial advice; the role of culture in the
relationship between risk tolerance and
financial advice. The above set of relationships
are discussed in the following paragraphs.
Firstly, it was demonstrated that financial
behaviour
is
positively
influenced
by
financial attitude, knowledge and inclusion,
meaning that the latter factors do shape the
individuals’ behaviour, in particular, the one’s
behaviour related to financial matters. Hence,
policymakers, educational institutions and the
management teams of financial industry are
recommended to design such curriculum and
policies so to equip individuals with sound
financial knowledge and awareness. This
insight is crucial especially in the context of
a post-communist transition country. These
findings are in line with previous studies (Çera,
Khan, Mlouk, et al., 2020; Fessler et al., 2019;
Garg & Singh, 2018; Potrich et al., 2016).
Secondly, the analysis highlights that financial
literacy partly influences on financial advice,
since one financial literacy’s component was
found to be insignificant (financial knowledge).
Hence, financial attitude and behaviour positively
affect one’s financial advice, while financial
knowledge does not impact financial advice.
The above results underline the importance
of financial attitude and behaviour in seeking
advice from the others about financial matters,
as identified by other authors (Moreland, 2018;
Sherraden et al., 2015).
Thirdly, results of the analysis have shown
that financial advice is positively affected by
financial inclusion. As it was hypothesized,
between one’s financial inclusion and financial
advice are related, since financial inclusion
leads to financial advice. In general, financial
regulations encourage financial institutions to
give financial advice to their clients (Gerrans &
Hershey, 2014; Inderst & Ottaviani, 2012). Such
regulations under the ambit of the financial
system can be complimented with various
financial literacy enhancement programs.
These regulations can also influence the
behaviour of individuals and financial advice.
Finally, this article has demonstrated the
role of culture in the effect of risk tolerance
on financial advice. Culture is represented by
uncertainty avoidance, which is one dimension
of the Hofsted’s (2010) culture. Findings of
this work has shown that financial advice and
risk tolerance reflect a negative association
for individuals from Poland, whereas for those
from Spain it is a slightly positive association.
According to Hofsted’s index, individuals from
Poland manifest a very high preference for
avoiding uncertainty, while individuals from
Spain have not such very high preference.
Considering the above discussion, one can
conclude that culture is an important factor in
the linkage between risk tolerance and financial
advice. Given this finding, it can be said that if
a financial literacy programmes will be designed
and deliver, not same results will be gain across
countries, in particular related to the relationship
between risk tolerance and financial advice,
since countries manifest differences in culture.
Study Implications
This paper offers theoretical application and
practical implications. On the note of theoretical
contribution of the article, the most important
thing is that one can identify the moderation
effect of culture on the effect of risk tolerance
on financial advice as an essential factor to
be considered in studying financial literacy
puzzle in an international context. This
insight leads to the modification of the used
conceptual framework by the scholars in talking
determinants financial literacy, capability and/or
satisfaction and their effects.
On the note of practical implications, the
article provides useful insights for governments,
public-policy promoters, educational institutions,
and financial industry to design strategies/
policies aimed at improving individuals’ financial
literacy and inclusion. They are recommended to
embrace or design new syllabi, rules, and plans
in order to include individuals in financial service
system and develop financial literacy. Central
banks and other financial institutions across the
Europe have established partnerships with local
educational institutions by introducing initiatives
based on the online management and virtual
portfolio of securities. By doing so, people can
gain knowledge related to financial products and
markets. Moreover, in such initiatives, there is
the possibility experience investing in securities
(OECD, 2016).
The research is not free of its limitations.
Firstly, this paper is conducted in two European
4, XXIV, 2021
117
Finance
country and this limits its findings’ generalisation
to other contexts, in particular, regarding the
culture effect. However, the replication of the
conceptual framework applied in this article,
can contribute to its validity by including in
the analysis more countries. Secondly, selfreporting on selected indicators was applied as
a way to collect the data. Hence, a respondent’s
answer was subject to recall (Xiao et al., 2014).
This limitation can be overcome by using
financial diaries as a tool to collect data and
information is (Potocki & Cierpiał-Wolan, 2019).
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