Switching from commissions on mutual funds to flat-fees: How are advisory clients affected?

Steffen Meyer, Charline Uhr, Benjamin Loos and Andreas Hackethal

Journal of Economic Behavior & Organization, 2023, vol. 209, issue C, 423-449

Abstract: Using a field study at a German brokerage, we investigate advised individual investors’ behavior and outcomes after self-selecting into a flat-fee scheme (percentage of portfolio value) for mutual funds. In a difference-in-differences setting, we compare 699 switchers to propensity-score-matched advisory clients who remained in the commission-based scheme. Switchers increase their portfolio values, improve portfolio diversification, and increase their portfolio performance. They also demand more financial advice and follow more advisor recommendations. We argue that switchers attribute a higher quality to the unchanged advisory services.

Keywords: Household finance; Individual investor; Financial advice; Inducements; Consumer financial protection (search for similar items in EconPapers)
JEL-codes: D14 D18 G11 G24 G28 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:209:y:2023:i:c:p:423-449

DOI: 10.1016/j.jebo.2023.03.015

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