What renders financial advisors less treacherous? On commissions and reciprocity

Vera Angelova

No 2016-029, SFB 649 Discussion Papers from Humboldt University Berlin, Collaborative Research Center 649: Economic Risk

Abstract: An advisor is supposed to recommend a financial product in the best interest of her client. However, the best product for the client may not always be the product yielding the highest commission to the advisor. Do advisors nevertheless provide truthful advice? If not, will a voluntary or obligatory upfront payment by clients induce more truthful advice? According to the results, both types of payment lead to more truthful advice. More generally, in a senderreceiver game with conflict of interest, an upfront payment to the sender by the receiver improves information transmission.

Keywords: financial advisors; asymmetric information; sender-receiver game; reciprocity; experiments (search for similar items in EconPapers)
JEL-codes: C91 D03 D82 L15 M52 (search for similar items in EconPapers)
Date: 2016
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Working Paper: What renders financial advisors less treacherous? - On commissions and reciprocity - (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:sfb649:sfb649dp2016-029

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