Do Seemingly Smarter Consumers Get Better Advice?

Tabea Bucher-Koenen () and Johannes Koenen ()

No 201501, MEA discussion paper series from Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy

Abstract: In this paper, we study the interaction between financial advisors and customers with a potential conflict of interest. We show in a simple analytical framework that advisors have an incentive to provide better advice to consumers who appear to be better informed. From this, we derive an identification strategy to infer the quality of advice received from variables observed in a representative survey of German consumers. Our identification strategy makes use of the fact that we observe both a generally observable signal of a customer's financial literacy as well as an objective measure, which is not observed by the advisor. We apply this strategy to three different empirical settings. In each of these settings, we find consistent evidence that consumers with worse signals of financial literacy on average receive worse financial advice. In particular, both women and individuals without tertiary education are negatively affected.

JEL-codes: D8 E2 G2 (search for similar items in EconPapers)
Date: 2015-02-26
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

Downloads: (external link)
http://mea.mpisoc.mpg.de/uploads/user_mea_discussionpapers/1630_01-2015.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mea:meawpa:201501

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in MEA discussion paper series from Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy, Amalienstraße 33, 80799 München, Germany.
Bibliographic data for series maintained by Henning Frankenberger ().