| 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. |