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What renders financial advisors less treacherous? On commissions and reciprocity

Listed author(s):
  • Vera Angelova

Abstract: An advisor is supposed to recommend a nancial 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 con ict of interest, an upfront payment to the sender by the receiver improves information transmission.

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File URL: http://sfb649.wiwi.hu-berlin.de/papers/pdf/SFB649DP2016-029.pdf
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Paper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2016-029.

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Length: 31 pages
Date of creation: Aug 2016
Handle: RePEc:hum:wpaper:sfb649dp2016-029
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