Evaluating the relationship between IFA remuneration and advice quality

An empirical study

Authors

  • Jiri Sindelar University of Finance and Administration Prague
  • Petr Budinsky University of Finance and Administration Prague

DOI:

https://doi.org/10.61190/fsr.v26i4.3372

Keywords:

Systemic distribution risk, Investments funds, Life insurance, Agent principal problem, Conflict of interests, Financial advice

Abstract

This article deals with the interaction between commission remuneration of independent financial advisers and selected sales factors, including the quality of advice. Utilizing data on investment transactions and a linear model with mixed effects, we have found that the link between commission and quality of the subsequent recommendation is not homogeneous, and advice-bias potential is present only in a limited range of organizational environments, connected mainly to the flat-structure business model. On the other hand, arbitrage between different product classes was found to create a biasing potential across almost all types of firms, creating potential for market systemic risk. Finally, the effect of information provided was proved to be significant only to a very limited extent. © 2017 Academy of Financial Services.

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Published

2017-12-30

How to Cite

Sindelar, J., & Budinsky, P. (2017). Evaluating the relationship between IFA remuneration and advice quality: An empirical study. Financial Services Review, 26(4), 367–386. https://doi.org/10.61190/fsr.v26i4.3372

Issue

Vol. 26 No. 4 (2017): Winter 2017

Section

New Original Submission

License

Copyright (c) 2017 Academy of Financial Services

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