A Labor Market for Persuaders: Theory and Evidence from Financial Advice

We investigate the impact of records of complaints on behavior of financial advisers. In a model of financial advice with customers observing signals about an asset's performance but not learning the signal's precision, an adviser's choice of an information technology faces a trade-off: less precise technologies persuade a client to purchase more often, but less precise technologies also generate more consumer complaints and enhance the likelihood of complaints being successful. Modestly persuasive advisers have records with more than average complaints but less than average successful complaints - and are more likely to be (re)employed than advisers with clean records or records of successful complaints.