Template-type: ReDIF-Paper 1.0
Author-Name: Calcagno, Riccardo
Author-Email: calcagno@em-lyon.com
Author-Name: Giofré, Maela
Author-Email: maela.giofre@unito.it
Author-Name: Urzě-Brancati, Maria Cesira
Author-Email: cesira.urzi@carloalberto.org
Author-Workplace-Name: University of Turin
Author-Workplace-Homepage: http://www.est.unito.it/
Title: To Trust is Good, but to Control Is Better: How Investors Discipline Financial Advisors'Activity
Abstract: Using a survey of clients from one of the largest Italian banks, we ?nd that investors with low level
of trust in professional advisors seek ?nancial counselling, but make their decisions autonomously. We
investigate whether these investors exert some form of control over the recommendations they receive,
and, if so, which one. Investors can push advisors to provide better recommendations either by asking for
a second expert?s opinion, such as in the case of credence services, or by monitoring closely the advisor?s
activity themselves. We ?nd that three quarters of investors do not exert any control on advisors. Di¤erent
types of ?nancial competence ? self-assessed or test-based ? serve di¤erent purposes. The investors
featuring higher self-assessed ?nancial competence are more likely to control the advisor?s activity. The
mechanism through which investors exert control over the advisors? activity depends instead on the
investors? degree of test-based ?nancial literacy. Investors with high ?nancial literacy directly monitor
the advisors?activity. Investors with low ?nancial literacy are more likely to seek a second professional
opinion in support of the recommendations previously received. Our ?ndings suggest that improving
investor ?nancial knowledge may foster direct control of the advisor?s activity. Moreover, facilitating the
comparison between ?nancial products by standardized and centralized information may be very e¤ective
to protect poorly literate investors.
Length: pages 55
Creation-Date: 2017-05
File-URL: http://www.est.unito.it/do/home.pl/Download?doc=/allegati/wp2017dip/wp_18_2017.pdf
File-Format: Application/PDF
Handle: RePEc:uto:dipeco:201718