Do Financial Advisors Provide Tangible Benefits for Investors? Evidence from Tax-Motivated Mutual Fund Flows

EFA 2014 Lugano Meetings Paper

42 Pages Posted: 18 Nov 2012 Last revised: 3 Mar 2016

See all articles by Gjergji Cici

Gjergji Cici

University of Kansas - School of Business

Alexander Kempf

University of Cologne - Department of Finance & Centre for Financial Research (CFR)

Christoph Sorhage

University of Cologne - Department of Finance & Centre for Financial Research (CFR)

Multiple version iconThere are 2 versions of this paper

Date Written: July 2015

Abstract

Rationality would suggest that advice-seeking investors receive benefits from costly financial advice. However, evidence documenting these benefits for U.S. investors has so far been lacking. This paper is the first to document that U.S. mutual fund investors indeed receive one of the many previously hypothesized benefits associated with financial advice. The documented benefit comes from valuable tax-management advice that helps investors avoid taxable fund distributions and becomes even more valuable when investors face distributions that can cause large and hard-to-predict tax liabilities. Additional evidence suggests that financial advice helps with other aspects of tax management such as tax-loss selling.

Keywords: Mutual funds; Taxable fund distributions; Financial advisors

JEL Classification: D14, G11, G24, H24

Suggested Citation

Cici, Gjergji and Kempf, Alexander and Sorhage, Christoph, Do Financial Advisors Provide Tangible Benefits for Investors? Evidence from Tax-Motivated Mutual Fund Flows (July 2015). EFA 2014 Lugano Meetings Paper. Available at SSRN: https://ssrn.com/abstract=2177401 or http://dx.doi.org/10.2139/ssrn.2177401

Gjergji Cici (Contact Author)

University of Kansas - School of Business ( email )

Capitol Federal Hall
1654 Naismith Drive
Lawrence, KS 66045
United States
785-864-3873 (Phone)

HOME PAGE: http://business.ku.edu/gjergji-cici

Alexander Kempf

University of Cologne - Department of Finance & Centre for Financial Research (CFR) ( email )

Cologne, 50923
Germany
+49 221 470 2714 (Phone)
+49 221 470 3992 (Fax)

Christoph Sorhage

University of Cologne - Department of Finance & Centre for Financial Research (CFR) ( email )

Cologne, 50923
Germany
49 221 470 7885 (Phone)
49 221 470 3992 (Fax)

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