Nothing to Declare: Mandatory and Voluntary Disclosure Leads Advisors to Avoid Conflicts of Interest
Sah and Loewenstein start from the finding that disclosing a conflict of interest rarely changes what consumers do, and can leave advisers giving more biased advice. Across three experiments with real money, they find that disclosure can work when advisers are able to avoid the conflict altogether. Mandatory and voluntary disclosure may discourage advisers from taking on conflicts, which leaves them with nothing to disclose. The authors argue that people dislike being seen as biased, so policies that activate reputational and ethical concerns push advisers to avoid conflicts.
Sah and Loewenstein start from the finding that disclosing a conflict of interest rarely changes what consumers do, and can leave advisers giving more biased advice. Across three experiments with real money, they find that disclosure can work when advisers are able to avoid the conflict altogether. Mandatory and voluntary disclosure may discourage advisers from taking on conflicts, which leaves them with nothing to disclose. The authors argue that people dislike being seen as biased, so policies that activate reputational and ethical concerns push advisers to avoid conflicts.
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Sah, S., & Loewenstein, G. (2014). Nothing to Declare: Mandatory and Voluntary Disclosure Leads Advisors to Avoid Conflicts of Interest. Psychological Science, 25(2), 575-584. doi:10.1177/0956797613511824