Coming Clean Still Dirty, Says Study

April 2005
Journal of Financial Planning;Apr2005, Vol. 18 Issue 4, p18
Academic Journal
This article references a study in the January 2005 issue of the Journal of Legal Studies on disclosure by investment advisors. The study's authors--two professors and a doctoral student at Carnegie Mellon University--ran a series of experiments on 150 university students. Even when advisees received a warning that the advice given in the experiment was biased, they ignored the warning and paid attention to the advice. Some advisors were given a financial incentive to give misleading advice regarding the value of coins in a jar. The most misleading advice was given by advisors who also had to disclose their conflict of interest. A third study found that advisors required to disclose conflicts of interest felt less of an obligation to protect the advice recipient and actually gave even more biased advice as a way of countering what they perceived as substantial discounting by the advice.


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