The Influence of Financial Advisors on Household Portfolios: A Study on Private Investors Switching to Financial Advice

37 Pages Posted: 17 Feb 2009

See all articles by Ralf Gerhardt

Ralf Gerhardt

Goethe University Frankfurt - Department of Finance

Andreas Hackethal

Goethe University Frankfurt - Faculty of Economics and Business Administration; Goethe University Frankfurt - Research Center SAFE

Date Written: February 14, 2009

Abstract

Investment advisors have significant influence on private investors' financial decisions but empirical studies of their behavior are rare. Based on a large and unique data set of the detailed portfolio compositions and daily transactions of more than 65,000 customers of a large German direct bank, we first compare advised investors with groups of non-advised investors, including matched peers. We find that the effect of investment advice is probably less than assumed. To underline this finding, we conduct an event study comparing 597 investors before and after the decision to take regular investment advice. We find much higher trading activity after the event due to advisors re-structuring clients' portfolios, less risky and speculative trading and rising diversification.

Keywords: Investment Advice, Household Portfolios, Investment Behavior

JEL Classification: D14, G29

Suggested Citation

Gerhardt, Ralf and Hackethal, Andreas, The Influence of Financial Advisors on Household Portfolios: A Study on Private Investors Switching to Financial Advice (February 14, 2009). Available at SSRN: https://ssrn.com/abstract=1343607 or http://dx.doi.org/10.2139/ssrn.1343607

Ralf Gerhardt (Contact Author)

Goethe University Frankfurt - Department of Finance ( email )

Grueneburgplatz 1
Frankfurt, 60323
Germany

Andreas Hackethal

Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )

Theodor-W.-Adorno Platz 3
Frankfurt am Main, 60323
Germany

Goethe University Frankfurt - Research Center SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

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