Followers of financial advisors favor risky advice

Risk-taking is critical to decisions. Unfortunately, information about risk is not always available, and that the lack of information prompts people to use advice. A crucial question about using advice to deal with risk and uncertainty is how advice influences risk-taking, yet little research has investigated whether the effect of advice-following on risk-taking is unbiased. In two experimental studies in a financial investment context, we investigate whether investors are biased in following advice and how biased advice-following influences risk-taking. Furthermore, we investigate whether advice quality, decision environment, and justification moderate advice-following bias on risk-taking. We find that individual decision-makers follow advice across risk domains and advice quality when explained to the investors. However, we identify asymmetry in advice-following, with a bias for risk-seeking over risk-averse advice. This asymmetric effect is robust irrespective of the decision environment but limited to high-quality advice and explanations.