Fee Effects

Judge, Kathryn

doi:10.2139/ssrn.2270072

Cited by 2 publications

(2 citation statements)

References 7 publications

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“…In laboratory settings, Cain et al (2005) finds that disclosure leads to worse advice, perhaps because advisors feel that disclosure gives them a license to exaggerate claims, and De Meza et al (2010) finds limited behavioral changes among insurance purchasers in response to disclosure. Our research also informs an emerging legal literature, including Judge (2012) and Schwarcz (2007), on how to structure commissions disclosure provisions.…”

Section: Introductionmentioning

confidence: 60%

Understanding the Advice of Commissions-Motivated Agents: Evidence from the Indian Life Insurance Market

Anagol

Cole

Sarkar

2017

Review of Economics and Statistics

183

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We conduct a series of field experiments to evaluate the quality of advice provided by life insurance agents in India. Agents overwhelmingly recommend unsuitable, strictly dominated products, which provide high commissions to the agent. Agents cater to the beliefs of uninformed consumers, even when those beliefs are wrong. We also find that agents appear to focus on maximizing the amount of premiums (and therefore commissions) that customers pay, as opposed to focusing on how much insurance coverage customers need. A natural experiment requiring disclosure of commissions for a specific product results in agents recommending alternative products with high commissions but no disclosure requirement. A follow-up agent survey sheds light on the extent to which poor advice reflects both the commission incentives as well as agents' limited product knowledge.

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Section: Introductionmentioning

confidence: 60%

Understanding the Advice of Commissions-Motivated Agents: Evidence from the Indian Life Insurance Market

Anagol

Cole

Sarkar

2017

Review of Economics and Statistics

183

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“…As noted above, the hub-and-spokes model of investment management comes with a string of intermediaries including expert advisors and consultants. Whereas Judge (2013Judge ( , 2015 disparages agents, arguing they impose transactions costs and greater complexity in the production of financial services, these agents are often fundamental in the framing and realising of goals and objectives. Furthermore, advisors and consultants can provide a degree of continuity in commercial relationships otherwise subject to the flux and flow of the financial services industry.…”

Section: Two Institutional Factorsmentioning

confidence: 99%

The Outsourced Chief Investment Officer Model of Management and the Principal–Agent Problem

Clark¹,

Urwin²

2017

JOR

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By convention, the responsibility for framing pension fund investment strategy lies with boards and their investment subcommittees, outsourcing the major part of the implementation of chosen investment strategies to various asset managers. In recent years, some pension funds have begun to outsource the investment strategy and implementation thereby locating authority and responsibility with external providers. In this paper, we focus upon the Outsourced Chief Investment Officer (OCIO) model of management emphasising the forces driving the adoption of this type of arrangement, its characteristics and what defines success. This model of management has the merit of replacing multiple providers with one contract on a fee-for-performance basis. For this model to be effective, it is shown that it must be well-governed. This includes clarity of mandate and delegation as noted in prior research on pension fund governance. In addition, any governance regime must address the principal-agent problem if the OCIO model is to realise clients' ambitions. This may require high-level Board competence, investment advisory services, and performance assessment processes that are sensitive to the unseen forces that influence success.

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Fee Effects

Cited by 2 publications

References 7 publications

Understanding the Advice of Commissions-Motivated Agents: Evidence from the Indian Life Insurance Market

Understanding the Advice of Commissions-Motivated Agents: Evidence from the Indian Life Insurance Market

The Outsourced Chief Investment Officer Model of Management and the Principal–Agent Problem

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