Is Unbiased Financial Advice To Retail Investors Sufficient? Answers from a Large Field Study

Abstract

Working with one of the largest brokerages in Germany, we record what happens when unbiased investment advice is offered to a random set of roughly 8,000 of the brokerage’s several hundred thousand active retail customers. We find that investors who most need the financial advice are least likely to obtain it. The investors who do obtain the advice (about 5%), however, hardly follow the advice, and so do not improve their portfolio efficiency much. Overall, our results imply that the mere availability of unbiased financial advice is a necessary but not sufficient condition for benefiting retail investors.

Keywords: retail investors, brokers, financial advice, efficient portfolios

JEL Classification: D14, G11, G24, G28