Financial Advice to Consumers. An explorative study regarding the documentation requirements’ impact on the financial advice

Abstract

ABSTRACT During recent years the supply of financial investments has increased. Today saving products and financial services are more complex and difficult to understand for ordinary consumers. This has resulted in a larger need of financial advisors and consequently the implementation of the Swedish law on financial advice to consumers. Recently, the law on financial advice to consumers and the documentation requirements have been questioned. This study examines how financial advisors perceive the framework of the financial advice, particularly the documentation requirements, and how it affects their actions, and thus the advice to the customers. The result indicates that centralized advice could increase in line with the more frequent use of technical tools and since advisors think it is difficult to be sure that customers understand more advanced and complex alternatives. The findings indicate that customers with low financial literacy more likely receive centralized advice, which in turn may be identical to other customers advice, given a similar risk attitude, expected return, and investment horizon. Furthermore, this paper indicates a need of clearer documentation requirements and a risk of financial exclusion.