The Market for Conflicted Advice

• 成果类型: Article
• 署名作者: Chang, Briana; Szydlowski, Martin
• 署名单位: University of Wisconsin System; University of Wisconsin Madison; University of Minnesota System; University of Minnesota Twin Cities
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12848
• 发表日期: 2020
• 页码: 867-903
• 关键词: information; COMPETITION; BROKERS; search; MODEL

摘要

We present a model of the market for advice in which advisers have conflicts of interest and compete for heterogeneous customers through information provision. The competitive equilibrium features information dispersion and partial disclosure. Although conflicted fees lead to distorted information, they are irrelevant for customers' welfare: banning conflicted fees improves only the information quality, not customers' welfare. Instead, financial literacy education for the least informed customers can improve all customers' welfare because of a spillover effect. Furthermore, customers who trade through advisers realize lower average returns, which rationalizes empirical findings.