The aim of the present study was to explore the effect of the advice given by an insurance agent, along with that of two further factors: a fair disclosure statement regarding ‎the agent’s ‎conflict of interest, and the customer’s degree of financial literacy. Two experiments conducted among undergraduate students in Israel showed that customers ‎mostly ‎follow the agent’s recommendation, even against their best ‎interest, and despite the presence of a fair disclosure statement. Only participants with high financial literacy, who received a disclosure statement, did examine the alternatives closely and rejected the advice when the recommendation was damaging. We also ruled out the existence of a negative psychological reactance response to a disclosure statement that would work to the detriment of financially literate participants.

Journal of Consumer Affairs