This paper focuses on the investor-advisor relation, looking at financial advisory as a fiduciary service. Consistently with the economic literature on the Trust Game, we formalize trust between financial advisors and clients as driven by a combination of two traditional motives – a norm to trust and anticipated reciprocation. We use related literature and insights from the recently introduced European Markets in Financial Instruments Directive 2 (MiFID 2) to define an original survey to estimate a structural equation model of trust formation, where trust and its two main motives are described as latent variables. Besides this methodological contribution, we test the validity of the hypothesized structural relation and explore whether specific features of financial advisors are likely to lead to different trust-formation processes. We find that the professional framing (tied versus bank advisors) and the maturity (new entrants versus incumbents) of financial advisors do indeed support different trust-formation processes. We conclude by exploring how these processes may be differently affected by the new regulation and discussing implications for the financial advisory industry.

Trust-formation processes in financial advisors: A structural equation model

Cruciani C.;Gardenal G.
;
Rigoni U.
2021

Abstract

This paper focuses on the investor-advisor relation, looking at financial advisory as a fiduciary service. Consistently with the economic literature on the Trust Game, we formalize trust between financial advisors and clients as driven by a combination of two traditional motives – a norm to trust and anticipated reciprocation. We use related literature and insights from the recently introduced European Markets in Financial Instruments Directive 2 (MiFID 2) to define an original survey to estimate a structural equation model of trust formation, where trust and its two main motives are described as latent variables. Besides this methodological contribution, we test the validity of the hypothesized structural relation and explore whether specific features of financial advisors are likely to lead to different trust-formation processes. We find that the professional framing (tied versus bank advisors) and the maturity (new entrants versus incumbents) of financial advisors do indeed support different trust-formation processes. We conclude by exploring how these processes may be differently affected by the new regulation and discussing implications for the financial advisory industry.
File in questo prodotto:
File Dimensione Formato  
QREF_trust 2021.pdf

non disponibili

Descrizione: Trust-formation processes in financial advisors_Cruciani-Gardenal-Rigoni 2021
Tipologia: Documento in Pre-print
Licenza: Accesso chiuso-personale
Dimensione 2.24 MB
Formato Adobe PDF
2.24 MB Adobe PDF   Visualizza/Apri

I documenti in ARCA sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10278/3744167
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 2
  • ???jsp.display-item.citation.isi??? 1
social impact