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Personal Financial Advice and Portfolio Quality
80 Pages Posted: 18 Jul 2022 Last revised: 16 Jul 2025
Date Written: September 27, 2024
Abstract
We document widespread use of personal financial advice among retail investors. Individuals seek competent and trusted sources for financial advice among their family and friends. Investors who provide advice to family and friends are positively selected and emphasize the reputational costs of giving risky financial advice. While previous studies have shown that advice shared on social media promotes active trading, we show that personal financial advice encourages investing in funds over single stocks. Our evidence complements the existing literature on financial advice in online social networks by highlighting differences in incentives and outcomes of advice to close personal connections.
Keywords: Social Finance, Portfolio Choice, Investment Behavior, Peer Effects
JEL Classification: D14, G11, G40, G50
Suggested Citation: Suggested Citation
Balakina, Olga and Bäckman, Claes and Hackethal, Andreas and Hanspal, Tobin and Lammer, Dominique,
Personal Financial Advice and Portfolio Quality
(September 27, 2024). SAFE Working Paper No. 353, Available at SSRN: https://ssrn.com/abstract=4150243 or http://dx.doi.org/10.2139/ssrn.4150243
Olga Balakina
Leibniz Institute for Financial Research SAFE ( email )
(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany
Leibniz Institute for Financial Research SAFE ( email )
(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany
