To trust is good, but to control is better: how investors discipline financial advisors’ activity

Riccardo Calcagno (), Maela Giofre' () and Maria Cesira Urzì-Brancati ()
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Riccardo Calcagno: EMYLON Business School and CeRPñCollegio Carlo Alberto
Maria Cesira Urzì-Brancati: International Longevity Centre - UK
Authors registered in the RePEc Author Service: Maria Cesira Urzì Brancati

No 157, CeRP Working Papers from Center for Research on Pensions and Welfare Policies, Turin (Italy)

Abstract: Using a survey of clients from one of the largest Italian banks, we investigate whether investors exert some form of control over the quality of the recommendations they receive, and if so which one. We find that investors with low level of trust seek financial counselling, but decide autonomously. Within this subgroup of investors, those with high self-assessed financial competence are more likely to control the quality of the advice. We also observe that their test-based degree of financial literacy affects the way they discipline the advisors. Investors with high financial literacy monitor the advisor’s activity by themselves. Instead, investors with low financial literacy are more likely to search for a second expert’s opinion which confirms the recommendations previously received, as for credence services. Our findings suggest that access to different financial institutions is beneficial especially for investors with poor financial literacy.

Pages: 38 pages
Date: 2016-03
New Economics Papers: this item is included in nep-soc
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http://www.cerp.carloalberto.org/wp-content/uploads/2016/03/WP_157-1.pdf (application/pdf)

Related works:
Journal Article: To trust is good, but to control is better: How investors discipline financial advisors’ activity (2017)
Working Paper: To trust is good, but to control is better: How investors discipline financial advisors’ activity (2017)
Working Paper: To Trust is Good, but to Control Is Better: How Investors Discipline Financial Advisors'Activity (2017)
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