Journal of Economic Literature: Vol. 50 No. 2 (June 2012)

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Financial Advice

Article Citation

Inderst, Roman, and Marco Ottaviani. 2012. "Financial Advice." Journal of Economic Literature, 50(2): 494-512.

DOI: 10.1257/jel.50.2.494

Abstract

Financial advice could play an essential role in well-functioning markets for retail financial products, given that many consumers find it difficult to evaluate the complex products on offer. However, conflicts of interest, which are pervasive in some parts of the industry, can turn advice into a curse rather than a blessing for consumers, especially when consumers are not sufficiently wary. Through a simple model of financial advice, we overview the pros and cons of various policy interventions, such as imposing mandatory disclosure, banning commissions, and regulating contract cancellation terms. (JEL D14, D18, G21, G28)

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Authors

Inderst, Roman (Goethe U Frankfurt)
Ottaviani, Marco (Bocconi U and Northwestern U)

JEL Classifications

D14: Personal Finance
D18: Consumer Protection
G21: Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
G28: Financial Institutions and Services: Government Policy and Regulation


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