Consumer Protection and the Role of Advice in the Market for Retail Financial Services

INDERST [2011] sets out the most important reasons for deficient decisions by retail customers in financial services markets, viz., lack of financial literacy and sophistication, »behavioral biases,« and the complexity of products. The paper also rightly stresses the crucial role of advice and the problems that come with it. Most importantly, it presents a lucid discussion of the policy options that are meant to improve advice or to reduce the need for advice. Instead of dealing with the whole line of argument presented in the paper, this comment will focus on three aspects: First, it will try to broaden the perspective by reexamining the scope of policy options. Second, it will highlight some problems that specifically relate to the role of advice. Third, it will address issues arising from the choice of adequate enforcement mechanisms.