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To trust is good, but to control is better: How investors discipline financial advisors' activity
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depends instead on the investors' degree of test-based financial literacy. Investors with high financial literacy directly monitor the advisors' activity themselves. Instead, investors with low financial literacy are more likely to seek a second expert's opinion that supports the recommendations previously received, such as in the case of credence services. Our findings suggest that improving investors financial knowledge may foster direct control of the advisor's activity. Moreover, facilitating the comparison between financial products by standardizing and centralizing the information may be very e¤ective to protect poorly literate investors.
Author(s):
Riccardo Calcagno
EM Lyon Business School
France
Maela Giofré
Università di Torino
Italy
Cesira Urzi-Brancati
Collegio Carlo Alberto
Italy