The Behavioural Finance Revolution
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The Behavioural Finance Revolution

A New Approach to Financial Policies and Regulations

Edited by Riccardo Viale, Shabnam Mousavi, Barbara Alemanni and Umberto Filotto

Financial markets are complex. Regulators strive to predict ways in which they can malfunction and create rules to prevent this from happening, yet behavioural impacts are often overlooked. This book explores how behavioural finance can go hand-in-hand with traditional methods to help banks and regulators create better policies. It also demonstrates how the behavioural finance revolution has opened the way to a more integrated approach to the analysis of economic phenomena.
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Chapter 17: Trust the change? Trust and the impact of policy making: the case of the introduction of the MiFID II Directive in the financial advisory industry

Caterina Cruciani, Gloria Gardenal and Ugo Rigoni


The MiFID II Directive pursues the objective of improving customer protection through increased transparency and represents a very significant transformation of the way in which financial advisory services are provided. However, financial advisors are not simply money managers, they are often “money doctors”, who deal with the emotional aspects of a client life and must be trusted in the presence of asymmetric information and capabilities. Therefore understanding what drives trust in financial advisors may help shed some light on the secondary effects of the normative requirements introduced by MiFID II into the financial advisory sector. Trust is a naturally multi-layered concept, characterized by very different co-existing elements, anticipated reciprocation and adherence to a social norm of trust. We use a survey involving a large number of advisors from different institutions to test a model of trust as determined by anticipated reciprocation and social norm. The institutions differ in the tie that advisors have with them, ranging from tied agents to employees of the bank/financial institution. Moreover, one of the institutions is a new player in the financial advisory field, while the others can be considered incumbent in the sector. The analysis shows that different institutions differ also in terms of the trust-building processes, suggesting that they may be differently affected by normative or cultural changes of the elements underlying trust-building in financial advisory services.

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