Faculty of Economics and Business Administration Publications Database

Financial Advice

Ottaviani, Marco
Volume: 50
Number: 2
Pages: 494 - 512
Month: June
ISSN-Print: 0022-0515
Link External Source: Online Version
Year: 2012
Abstract: Financial advice could play an essential role in well-functioning markets for retail financial products, given that many consumers find it difficult to evaluate the complex products on offer. However, conflicts of interest, which are pervasive in some parts of the industry, can turn advice into a curse rather than a blessing for consumers, especially when consumers are not sufficiently wary. Through a simple model of financial advice, we overview the pros and cons of various policy interventions, such as imposing mandatory disclosure, banning commissions, and regulating contract cancellation terms.