Financial Advisors: A Case of Babysitters?

Andreas Hackethal, Michael Haliassos and Tullio Jappelli ()
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Andreas Hackethal: Goethe University Frankfurt

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: We use two data sets, one from a large brokerage and another from a major bank, to ask: (i) whether financial advisors tend to be matched with poorer, uninformed investors or with richer, experienced but presumably busy investors; (ii) how advised accounts actually perform relative to self-managed accounts; (iii) whether the contribution of independent and bank advisors is similar. We find that advised accounts offer on average lower net returns and inferior risk-return tradeoffs (Sharpe ratios). Trading costs contribute to outcomes, as advised accounts feature higher turnover, consistent with commissions being the main source of advisor income. Results are robust to controlling for investor and local area characteristics. The results apply with stronger force to bank advisors than to independent financial advisors, consistent with greater limitations on bank advisory services.

Keywords: Financial advice; portfolio choice; household finance (search for similar items in EconPapers)
JEL-codes: D8 E2 G1 (search for similar items in EconPapers)
Date: 2009-03-15, Revised 2011-03-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Published in Journal of Banking & Finance, 2012, 36(2), 509-524

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http://www.csef.it/WP/wp219.pdf (application/pdf)

Related works:
Journal Article: Financial advisors: A case of babysitters? (2012)
Working Paper: Financial Advisors: A Case of Babysitters? (2009)
Working Paper: Financial advisors: A case of babysitters? (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:sef:csefwp:219

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