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Institutional Mechanisms: Building Trust in Online and Offline Financial Advice Markets

Registration: free

Location: LG01 IRC Seminar Room, HBS, Whiteknights

Lunch: 12:30pm

Seminar: 1-2pm.



Over ten years after the beginning of the financial crisis, media coverage continues to focus on a lack of consumer trust in financial services. The crisis, bank bailouts, and numerous mis-selling scandals have all contributed to the erosion of customer trust, restoring that trust and public confidence is crucial to creating a flourishing financial services industry. In addition the industry is facing considerable change in the wake of the digital era, with FinTech and Robo-advisors changing the nature of the traditional business model and customer-advisor relationship. In situations where trust based on prior, or expected, exchange relationships has been eroded, theory suggests that, to some extent, it can be replaced by institutional-based trust (Zucker, 1986). That is, mechanisms such as escrows, certification and assurance services can be implemented by third party structures to create customer confidence in the exchange transaction (Pavlou and Gefen 2004).

Essentially, the effect of a customer’s trust in a financial adviser on their intention to purchase is not independent from the context of the exchange. Despite this, existing literature has largely ignored the conditions under which trust has a varying effect on behavioural intentions (Gefen et al., 2008; Fang et al., 2014). In response, the objective of this study is to investigate the moderating effect of institutional mechanisms and the conditions under which that effect holds. In particular, we explore propositions that institutional mechanisms will have a stronger effect in early stages of a relationship, in online channels and in transactions with a low level of complexity. In so doing, specifying circumstances under which a market for third party assurance might exist in the financial advice market.


To explore this objective a survey of 1433 first-time and returning customers of financial advice services is conducted and analysed. Partial least squares (PLS), a component based structural equation modelling technique regarded as appropriate for theory exploration (Jorskog and Wold, 1982), is applied to investigate the relationships between: (1) dimensions of trustworthiness; (2) trust; (3) perceived effectiveness of institutional mechanisms (PEIM); and (4) intention to purchase financial advice in the future. Building on this, a parametric multi-group analysis (PLS-MGA) is applied to compare the model across sub-groups of data to test the effect of a set of conditions –channel, stage of relationship and level of complexity.


First and foremost, the study confirms that overall PEIM negatively moderates the relationship between trust in an adviser and purchase intention. In other words, it decreases the importance of trust on behavioural intention. Initial stages of PLS-MGA analysis indicates that the moderating effect of PEIM is stronger online but is not effected by stage of relationship. Further analysis is to be carried out to explore transaction complexity as a condition.


The findings advance understanding of the conditional effect of trust by explicitly specifying channel as an important boundary condition to assess how trust influences purchase intention. Furthermore, they provide counter evidence to the proposition that institutional mechanisms will have a stronger effect in early stages of a relationship.

Practical implications

This study encourages public policy makers and financial service providers to continue to improve and/or develop institutional structures that create a transaction environment which feels safe and secure. In particular, evidencing a market for third-party assurance mechanisms in the financial services market such as independent assurance.


Trust, Institutional Mechanisms, Financial Services, PLS-SEM


Dr Laura Phillips is a Lecturer in Management and member of the Centre for Simulation, Analytics and Modelling at the University of Exeter Business School. Her research focuses on the impact of digital technologies on business model change and innovation, with a special interest in understanding customer value and how it can drive and inform change. Laura has been a researcher in this field for 10 years, working as an investigator on major research projects in the banking, cultural heritage, defence, telecoms and water sectors. Most recently, this has included VISTA AR, a £7.8m INTERREG project that explores visitor experience at cultural heritage sites, creating new VR and AR digital interpretations and exploring the new business models they enable. Laura’s research has been published in the International Journal of Production and Operations Management, Production Planning & Control and the Journal of Service Management. She is also a member of the Editorial Review Board for International Journal of Production & Operations Management.

Laura mtime20190228154850
Event information
Date 9th June 2019
Time 11:30am - 1:00pm
Venue Henley Business School, Whiteknights Campus
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