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Indirect costs of regulation

G

Gabriella Knipe

Member
Hi

I am stuck on the following indirect costs of regulation
an undermining of the sense of responsibility among intermediaries and advisors
I think it would help me understand better by knowing what would be an example of this?

Kind regards
 
Hi Gabriella

Thank you for your post. Indirect costs of regulation arise where we think there is a negative effect (cost) of regulation but it is difficult to quantify. A high level of regulation may leave intermediaries and advisors feeling undermined. This may lead to them not giving the best advice to clients ... perhaps as they no longer feel as responsible for the decision that the client makes believing that the regulation guides the client and therefore they don't have to. If as a result of this the client makes a sub-optimal decision perhaps as to which product or investment to choose then we can say there has been a cost (an indirect cost) due to the regulation.

I hope this helps and your studies are going well.

Helen
 
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