Regulatory focus and investment advisers' recommending behavior

Abstract

Purpose

This study examines the effect of a regulatory-focused prime (i.e. a brochure with a picture and message) on the recommending behavior of investment advisers in the context of an investment decision.

Design/methodology/approach

Three experiments were conducted with 468 participants, mostly from the financial services industry. Study 1 examined the direct effect of a regulatory-focused prime on an investment adviser's recommending behavior, whereas Study 2 examined the moderating role of regulatory fit on such behavior. Study 3 validated the findings.

Findings

The results provide evidence that a message using visual and textual cues based on a promotion and prevention regulatory focus may trigger a preference in an investment adviser's product recommendation. A promotion (prevention)-focused framed message will trigger the recommendation of an investment plan with a higher but riskier (safe and stable) potential return. However, when the same prime is presented with details of a performance incentive scheme, the effect of the prime is reduced when there is a regulatory nonfit between the prime and the message relating to the performance incentive scheme.

Practical implications

The findings highlight the importance of understanding how regulatory-focused stimuli may subconsciously influence the recommendation of investment advisers as heuristics used in decision-making, thereby influencing their clients' investment decisions.

Originality/value

Past studies have focused on how regulatory-focused visual and message cues influence consumer decision-making. This study provides empirical evidence regarding the influence of regulatory-focused prime on an investment adviser's behavior when providing investment advice.

Citation

Ewe, S.Y., Lee, C.K.C. and Gul, F.A. (2021), "Regulatory focus and investment advisers' recommending behavior", International Journal of Bank Marketing, Vol. 39 No. 1, pp. 107-126. https://doi.org/10.1108/IJBM-12-2019-0452