Is conflicted investment advice better than no advice?

John Chalmers and Jonathan Reuter

Journal of Financial Economics, 2020, vol. 138, issue 2, 366-387

Abstract: The benefit of investment advice depends on the quality of advice and the investor's counterfactual portfolio. We use changes in the Oregon University System Optional Retirement Plan to highlight the impact of plan design on the counterfactual portfolios of advice seekers. When brokers are available and target date funds (TDFs) are not, brokers help participants with high predicted demand for advice bear market risk, but they recommend higher-commission options. When brokers are removed and TDFs are added, new high-predicted-demand participants primarily invest in TDFs, which offer similar market risk but higher Sharpe ratios than the broker-advised portfolios within our sample.

Keywords: Investment advice; Broker; Counterfactual; Default; Retirement plan; Target date fund (search for similar items in EconPapers)
JEL-codes: D14 G11 G23 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (28)

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Working Paper: Is Conflicted Investment Advice Better than No Advice? (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:138:y:2020:i:2:p:366-387

DOI: 10.1016/j.jfineco.2020.05.005

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