Journal of Financial Economics Vol. 164 2025
Regulating inattention in fee-based financial advice
Abstract
We study the impact of disclosure and inattention on the decision to retain fee-based financial advice using a two-tiered natural regulatory experiment. Increased salience in fee disclosure raises the drop rate for advice, implying improved attention — particularly for relatively sophisticated investors. However, a novel auto-drop requirement for inattentive investors generates far more drops, implying limited attention despite salient disclosure — particularly for the unsophisticated. Contrary to studies of commission-based advice, we find that investors benefit from fee-based advice. Benefits are higher for less sophisticated investors, who tend to be detrimentally auto-dropped. Drops triggered by salient disclosure tend to be beneficial.
- DOI
- 10.1016/j.jfineco.2024.103985
- Volume
- 164
- Pages
- 103985
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref