Abstract

http://ssrn.com/abstract=1360440
 
 

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Financial Advisors: A Case of Babysitters?


Andreas Hackethal


Goethe University Frankfurt - Department of Finance

Michael Haliassos


Goethe University Frankfurt - Faculty of Economics and Business Administration; Goethe University Frankfurt - Center for Financial Studies (CFS); Goethe University Frankfurt - Research Center SAFE; Goethe University Frankfurt - House of Finance; CEPR

Tullio Jappelli


University of Naples Federico II - Department of Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Center for Studies in Economics and Finance - CSEF

June 8, 2011


Abstract:     
We use two data sets, one from a large brokerage and another from a major bank, to ask: (i) whether financial advisors are more likely to be matched with poorer, uninformed investors or with richer and experienced 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.

Number of Pages in PDF File: 43

Keywords: Financial advice, portfolio choice, household finance

JEL Classification: G1, E2, D8

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Date posted: March 19, 2009 ; Last revised: June 14, 2011

Suggested Citation

Hackethal, Andreas and Haliassos, Michael and Jappelli, Tullio, Financial Advisors: A Case of Babysitters? (June 8, 2011). Available at SSRN: http://ssrn.com/abstract=1360440 or http://dx.doi.org/10.2139/ssrn.1360440

Contact Information

Andreas Hackethal
Goethe University Frankfurt - Department of Finance ( email )
House of Finance
Grueneburgplatz 1
Frankfurt am Main, Hessen 60323
Germany
+49 69 79833700 (Phone)
Michael Haliassos (Contact Author)
Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )
Grueneburgplatz 1
Frankfurt am Main, D-60323
Germany
Goethe University Frankfurt - Center for Financial Studies (CFS)
Grueneburgplatz 1
Frankfurt am Main, 60323
Germany
HOME PAGE: http://www.ifk-cfs.de
Goethe University Frankfurt - Research Center SAFE ( email )
Grüneburgplatz 1
Frankfurt am Main, 60323
Germany
Goethe University Frankfurt - House of Finance
Grüneburgplatz 1
Frankfurt am Main, 60323
Germany
CEPR
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Tullio Jappelli
University of Naples Federico II - Department of Economics ( email )
Via Cintia - Monte S. Angelo
Napoli, 80126
Italy
HOME PAGE: http://www.csef.it/people/jappelli.htm
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
HOME PAGE: http://www.cepr.org/researchers/details/rschcontact.asp?IDENT=106354
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
Center for Studies in Economics and Finance - CSEF
84084 Fisciano, Salerno
Italy
+39 089 963 165 (Phone)
+39 089 963 169 (Fax)
HOME PAGE: http://www.csef.it/people/jappelli.htm
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