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Designing for Cost Transparency in Investment Advisory Service Encounters

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Author Info

  • Philipp Nussbaumer

    ()

  • Inu Matter

    ()

  • Gian Reto à Porta

    ()

  • Gerhard Schwabe

    ()

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    Abstract

    Investment advisory services of financial service providers (FSPs) exhibit several characteristics that are detrimental to advisory quality. The interaction of advisor and client is strained by a lack of transparency regarding the advisory process (what activities are performed and why) and the information used therein (what information is used for what purpose and with what effect), as well as regarding the precise costs of the service and the recommended products. In prior research, we suggested that process and information transparency issues may be appropriately addressed with collaborative information technology (IT) artifacts. In this paper, we argue that collaborative, transparent artifacts may also be a premise of enabling cost transparency. To this end, we describe a complete research cycle of designing, implementing, and evaluating a shared cost-transparent IT artifact to support client-advisor interaction in investment advisory encounters. Evaluation results suggest the efficacy of our design in improving the clients’ perceived cost transparency as well as increase their satisfaction and their willingness to pay for the received investment advice. These findings may also challenge the common belief of FSPs that transparent, fee-based advisory services would neither be accepted by clients nor be economically viable. Practical implications of these findings for designing advisory encounters with supportive IT are discussed. Copyright Springer Fachmedien Wiesbaden 2012

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    File URL: http://hdl.handle.net/10.1007/s12599-012-0237-1
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    Bibliographic Info

    Article provided by Springer in its journal Business & Information Systems Engineering.

    Volume (Year): 4 (2012)
    Issue (Month): 6 (December)
    Pages: 347-361

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    Handle: RePEc:spr:binfse:v:4:y:2012:i:6:p:347-361

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    Web page: http://www.springer.com/economics/journal/12599

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    Related research

    Keywords: Cost transparency; Financial investment advisory; Design science; Exploratory evaluation;

    References

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    1. Golec, Joseph H., 1992. "Empirical Tests of a Principal-Agent Model of the Investor-Investment Advisor Relationship," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 27(01), pages 81-95, March.
    2. Andersson, Fredrik & Holm, Hakan J., 1998. "Transparency preference and economic behavior," Journal of Economic Behavior & Organization, Elsevier, vol. 37(3), pages 349-356, November.
    3. Stracca, Livio, 2004. "Behavioral finance and asset prices: Where do we stand?," Journal of Economic Psychology, Elsevier, vol. 25(3), pages 373-405, June.
    4. Camerer, Colin & Weber, Martin, 1992. " Recent Developments in Modeling Preferences: Uncertainty and Ambiguity," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 325-70, October.
    5. Carlin, Bruce I., 2009. "Strategic price complexity in retail financial markets," Journal of Financial Economics, Elsevier, vol. 91(3), pages 278-287, March.
    6. Daniel Bergstresser & John M. R. Chalmers & Peter Tufano, 2009. "Assessing the Costs and Benefits of Brokers in the Mutual Fund Industry," Review of Financial Studies, Society for Financial Studies, vol. 22(10), pages 4129-4156, October.
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    Cited by:
    1. Walter Brenner & Dimitris Karagiannis & Lutz Kolbe & Jens Krüger & Larry Leifer & Hermann-Josef Lamberti & Jan Leimeister & Hubert Österle & Charles Petrie & Hasso Plattner & Gerhard Schwabe & Falk , 2014. "User, Use & Utility Research," Business & Information Systems Engineering, Springer, vol. 6(1), pages 55-61, February.

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