Financial advising in the presence of conflict of interests

In this paper we study the conflict faced by a financial advisor in allocating an investor's wealth between a risky asset and the riskless asset. The investor is dependent on the financial advisor's information for making an allocation decision while the financial advisor can give deceptive information according to her interests in these assets. The results show how the level of deception is affected by the investor's characteristics, represented by wealth and attitude towards risk, by the characteristics of assets, represented by riskiness and by the market structure represented by level of competition.