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Commission Bans and the Source and Quality of Financial Advice


  • Janko Gorter


In the wake of the financial crisis, several countries are to ban commission payments to improve the quality of financial advice. This paper investigates the potential impact of commission bans on the source and quality of financial advice. To this end, we extend Inderst and Ottaviani's (2012) framework by allowing for both direct and intermediary advice. Our extended model has a unique separating equilibrium where customers that are naïve about conflicts of interests prefer direct advice to intermediary advice, though the latter is of better quality. Alert customers rationally prefer intermediary advice. Accordingly, the welfare benefits from commissions bans may be limited in practice.

Suggested Citation

  • Janko Gorter, 2012. "Commission Bans and the Source and Quality of Financial Advice," DNB Working Papers 350, Netherlands Central Bank, Research Department.
  • Handle: RePEc:dnb:dnbwpp:350

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    References listed on IDEAS

    1. Carlin, Bruce I., 2009. "Strategic price complexity in retail financial markets," Journal of Financial Economics, Elsevier, vol. 91(3), pages 278-287, March.
    2. Moscarini, Giuseppe & Ottaviani, Marco, 2001. "Price Competition for an Informed Buyer," Journal of Economic Theory, Elsevier, vol. 101(2), pages 457-493, December.
    3. Roman Inderst & Marco Ottaviani, 2009. "Misselling through Agents," American Economic Review, American Economic Association, vol. 99(3), pages 883-908, June.
    4. Heski Bar-Isaac & Guillermo Caruana & Vicente Cuñat, 2010. "Information Gathering and Marketing," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 19(2), pages 375-401, June.
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    Cited by:

    1. van Ooijen, Raun & van Rooij, Maarten C.J., 2016. "Mortgage risks, debt literacy and financial advice," Journal of Banking & Finance, Elsevier, vol. 72(C), pages 201-217.

    More about this item


    information provision; conflicts of interests; commission bans; distribution channel; consumer financial protection;

    JEL classification:

    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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