Peter Tufano is the Sylvan C. Coleman Professor of Financial Management at the Harvard Business School. He previously served as the as the school's Senior Associate Dean for Planning and University Affairs, its Director of Faculty Development, and Head of the Finance Unit. His research and course development focus on mutual funds, corporate financial engineering, and consumer finance.
Tufano's mutual fund research covers a wide range of topics. He has studied the determinants of fund flows, fund governance, competition, fund distribution channels, fund regulations, fund accounting, the global fund industry, and money market funds. His work has been published in the Journal of Finance, the Journal of Financial Economics, and elsewhere.
Tufano's work on corporate financial engineering includes research and course development about security design, risk management, real options, and strategic uses of financial technology. He developed and taught a course on Corporate Financial Engineering and his work in this area has been published in the Harvard Business Review, various management and academic journals, and a Prentice-Hall book, Cases in Financial Engineering. His paper on risk management practices in the gold mining industry shared the Smith-Breeden prize for the best paper published in the Journal of Finance.
Tufano's third stream of work is in the field of consumer finance. Part of this research focuses on how to leverage financial innovations to serve the financial service needs of the poor. His work includes field experiments, course development, and statistical research. He is the coordinator of the HBS Executive Education program on Consumer Finance and in 2009 launched a joint MBA-JD course on Consumer Finance with Howell Jackson (HLS). He founded Doorways to Dreams Fund, Inc., (www.d2dfund.org) a nonprofit R&D lab that translates these ideas into practice in partnership with businesses and policymakers. Recently, Tufano's and D2D's research contributed to two changes in federal tax policy: splitting tax refunds to support low-income savings via IRS Form 8888, and enabling refund recipients to direct some of their refunds to purchase inflation-indexed savings bonds.
Tufano is a Research Associate at the National Bureau of Economic Research and co-chairs its working group on Household Finance. He serves on several non-profit, research, university, and government advisory boards. He consults to firms, nonprofits and governments; is a mutual fund independent trustee; and teaches in various executive education programs. Before joining the HBS faculty in 1989, Tufano earned his Ph.D. in Business Economics from Harvard University; his MBA from HBS, with high distinction as a Baker Scholar; and his A.B. degree in economics, summa cum laude, from Harvard College.
This article describes the consumer finance sector in the US since World War II. We first define the sector in terms of the functions delivered by firms (payments, savings/investing, borrowing, managing risk, and providing advice.) We provide time series evidence on major trends in consumption, savings, and borrowing. Examining consumer decisions, changes in regulation, and business practices, we identify four major themes that characterize the sector: (a) innovation that increased the choices available to consumer; (b) enhanced access in the form of broadening participation of consumers in financial activities, (c) do-it-yourself consumer finance, which allowed and forced consumers to take greater responsibility for their own financial lives, and (d) the resultant increase in household risk taking.
Annamaria Lusardi, Daniel Schneider and Peter Tufano
We use a unique, nationally representative cross-national dataset to document the reduction in individuals' usage of routine non-emergency medical care in the midst of the economic crisis. A substantially larger fraction of Americans have reduced medical care than have individuals in Great Britain, Canada, France, and Germany, all countries with universal health care systems. At the national level, reductions in medical care are related to the degree to which individuals must pay for it, and within countries are strongly associated with exogenous shocks to wealth and employment.
This paper reports the results of a 2007 experiment testing if specific process simplification can foster increased take-up rates for savings products, particularly by low-to-moderate income (LMI) households. Tax refund recipients at certain H&R Block tax preparation offices were given the option to purchase U.S. Savings Bonds with their tax refunds, augmenting the tax-site savings options offered by Block. Those who received the savings bond offer were substantially more likely to purchase a savings product on-site than those who didn't, even after controlling for client demographics. Much of this take-up was directed at intra-family gifting, or asset building on behalf of children.
We review a wide variety of programs that support savings by families, in particular by low- and moderate-income families. These programs range from ones that literally compel families to save, to those that make it hard not to save, make it easier to save, provide financial incentives to induce savings, leverage social networks to support savers, and finally, to programs that excite people to saving. These programs involve a number of different stakeholders, including governmental entities, social intermediaries, non-profit organizations, and for-profit firms including financial institutions. They embody a number of different assumptions about incentives, drawing from economics, psychology, and sociology. We describe examples of each program and provide some information on their economics and effectiveness. Our goal is not to identify the "best" program, but rather to lay out the range of innovations to meet the needs of heterogeneous potential savers.
In this paper, we analyze the spending decisions of over 1.5 million Americans who vary in their degree of revealed credit constraints. Specifically, we analyze how these Americans spend their income tax refunds, using transaction-level data from a stored-value card product. Card-holders may choose among several tax settlement and loan options, effectively receiving cash as much as 90 days earlier than would have been possible without a settlement product. Those selecting earlier settlement options pay higher fees and interest, therefore revealing the level of credit constraints or impatience. We find that more credit constrained or impatient individuals spend their monies more quickly. The mix of cash and merchant transactions is similar between more and less constrained groups. Finally, the primary merchant uses of refunds are to pay for necessities (grocery stores, gas stations, etc.), and the fraction of the refund spending devoted to these necessities is higher for those with greater revealed credit constraints.
This paper reports on a small-scale survey of the potential American demand for prize-linked savings accounts, an account that awards prizes as part of the saving product's return. In October 2006, Centra Credit Union launched a prize-linked savings pilot. As part of that initiative, we conducted a mall intercept survey of over 500 people in Clarksville, Indiana, the community where the program was launched. This preliminary data suggests that low-to-moderate income Americans may have substantial demand for prize-linked savings, with a majority of survey participants expressing an interest in opening a prize-linked savings account. As predicted by theory and international experience, interest in prize-linked savings is greatest among people who do not have regular saving habits, who have little actual savings, who play lotteries extensively, and who are optimistic about their futures.
H&R Block, the U.S. market leader in tax preparation services, must decide whether to offer financial services to its low-income clients. H&R Block is facing increased competition from branded and nonbranded tax preparers, and the number of returns prepared by the company has declined in recent years. The CEO, Mark Ernst, considers a proposal for Block to differentiate itself from these competitors by offering its low-income clients a range of financial services, including check cashing, money transfer, and savings products. Ernst must decide whether this new suite of services would be profitable for the company and determine its impact on Block's brand and how the company and the marketplace would receive it.
United Grain Growers Ltd. (UGG), a Canadian grain distributor, audited its exposure to a number of key risks, especially the impact of weather on grain volumes and operating income. Understanding these risks was crucial because the company was in the midst of a major modernization and diversification program. But although UGG already managed traditional risks through a variety of control processes, it was still faced with the problem of how to deal with the biggest risk; the weather.
