The best way to remove the influence of money from your decision making is….

Azim Arsiwala • 3 min read

 Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery."  - Charles Dickens

Your financial advisor recommends that you invest in a fund, and simultaneously discloses to you that they are sponsored by this fund. They also state that their decision is not influenced by the sponsorship. Do you invest? If so, do you discount the amount that is recommended?

It turns out that according to research, most people do invest, and they do discount the recommended amount advised.

The problem arises when closer attention is paid to the amount that is recommended. It turns out, financial advisors recommend a substantially higher amount from funds that sponsor them. This amount is generally substantially higher than the amount that you discount.

What is really interesting however is that research suggests that they are entirely unaware that they have over-inflated their recommendation. It’s highly likely that they genuinely, honestly believe that the sponsorship they are getting is not interfering with their guidance.

After all, if you ask them about this they might say: “What good is it if I lose a customer worth millions over one investment, it’s in my long term interest to benefit my customers first”.

Are the investment bankers lying? Research indicates, they are not. They are honest, and according to them, they are being more legitimate than others around them who might not be disclosing their conflicts of interest.

So then, what’s going on here? Well, this phenomenon is known as moral licensing.

Another example of moral licensing could be this; You are on a rigorous diet, you have managed to sustain this diet for several days now, and you have proceeded well towards your goal of losing weight. Today, you have had an extremely troubling, gruelling day at work. You finish your work and get home. You reach home to find your wife/spouse/flatmate has brought some absolutely delicious cake. The exact flavour that you like and it’s from your favourite bakery down the road. Keep imaging that and let's try and read your mind. Don't thoughts like this one pop up?: “I’ve done an exceptional job dieting, and I have progressed really well, today was a really really hard day & I deserve this for all the effort I have put in”.

Does that type of thought sound something along the lines of what you would think? If so, that is known as moral licensing. When you do something good, you find it morally acceptable to do something bad, (usually of a smaller level) as if the good somehow cancels out all the bad and you are morally “clean”.

In precisely the same line, it turns out that those who disclose their conflicts of interest, whether bankers, doctors or other practitioners attain their moral license when they disclose these statements to you. Due to that, they feel no guilt about taking those fees. This lack of remorse contributes to an elevated recommendation, in some part, due to an internal belief that disclosure implies that their clients would discount the advice.

Finally, we as customers are not very good as discounting the opinions of those whom we know are giving us recommendations under the influence of money. We have a false sense of belief that disclosure of interest in some part implies that those disclosing are confident in their recommendation and are not influenced by the gains they are receiving.

These two factors combine to highlight that disclosure is a fallacious solution to conflict of interest. Is it better than not disclosing? Research says, definitely. Is it the solution? Definitely not.

There are limits to transparency, and these limits are strongly interlinked to our limits as human beings. They are here to stay. What shouldn’t be here to stay are conflicts of interest in these types of professions, regardless of the level of disclosure they are obliged to provide. Disclosure isn’t the solution, and practitioners should stop believing it is.

Whether you are a customer or a practitioner, it’s essential that you take note of your psychological biases. If you strictly want what’s best for your customer, then whether you strongly believe in your conviction of being objective or not is irrelevant. This is because the subconscious parts of your decision making do not make these decisions based on your convictions.

The best, most effective way to remove the influence of money from your decision making is to remove money from your notion of decision making"

Cowry is a behavioural science consultancy that works with clients to ensure decision making biases are well accounted for in plans for within the company & externally for clients. By optimizing processes through a deep understanding of complex human behaviour, we believe organisations can create empowering change.

To learn more about behavioural science & our recent work get our latest edition of on the brain for free by clicking here. 


Loewenstein, G., Cain, D. M., & Sah, S. (2011). The limits of transparency: Pitfalls and potential of disclosing conflicts of interest.American Economic Review,101(3), 423-28.

Cain, D. M., Loewenstein, G., & Moore, D. A. (2005). The dirt on coming clean: Perverse effects of disclosing conflicts of interest.The Journal of Legal Studies,34(1), 1-25.

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