Do voluntary payments to advisors improve the quality of financial advice? An experimental sender-receiver game
Vera Angelova () and
No SFB649DP2016-030, SFB 649 Discussion Papers from Humboldt University, Collaborative Research Center 649
The market for retail nancial products (e.g. investment funds or insurances) is marred by information asymmetries. Clients are not well informed about the quality of these products. They have to rely on the recommendations of advisors. Incentives of advisors and clients may not be aligned, when fees are used by nancial institutions to steer advice. We experimentally investigate whether voluntary contract components can reduce the con ict of interest and increase truth telling of advisors. We compare a voluntary payment upfront, an obligatory payment upfront, a voluntary bonus afterwards, and a three-stage design with a voluntary payment upfront and a bonus after. Across treatments, there is signi cantly more truthful advice when both clients and advisors have opportunities to reciprocate. Within treatments, the frequency of truthful advice is signi cantly higher when the voluntary payment is large.
JEL-codes: C91 D03 D82 G20 L15 M52 (search for similar items in EconPapers)
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Working Paper: Do voluntary payments to advisors improve the quality of financial advice? An experimental sender-receiver game (2012)
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