Commission Bans and the Source and Quality of Financial Advice
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.
|Date of creation:||Sep 2012|
|Date of revision:|
|Contact details of provider:|| Postal: Postbus 98, 1000 AB Amsterdam|
Web page: http://www.dnb.nl/en/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Inderst, Roman & Ottaviani, Marco, 2009.
"Misselling through agents,"
IMFS Working Paper Series
36, Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS).
- Heski Bar-Isaac & Guillermo Caruana & Vicente Cunat, 2008.
"Information Gathering and Marketing,"
08-17, New York University, Leonard N. Stern School of Business, Department of Economics.
- Carlin, Bruce I., 2009. "Strategic price complexity in retail financial markets," Journal of Financial Economics, Elsevier, vol. 91(3), pages 278-287, March.
- Giuseppe Moscarini & Marco Ottaviani, 1998.
"Price Competition for an Informed Buyer,"
Cowles Foundation Discussion Papers
1199, Cowles Foundation for Research in Economics, Yale University.
When requesting a correction, please mention this item's handle: RePEc:dnb:dnbwpp:350. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rob Vet)
If references are entirely missing, you can add them using this form.