Best Buys and Own Brands: Investment Platforms’ Recommendations of Mutual Funds

46 Pages Posted: 23 Aug 2017 Last revised: 22 Dec 2019

See all articles by Gordon Cookson

Gordon Cookson

KPMG LLP

Tim Jenkinson

University of Oxford - Said Business School; European Corporate Governance Institute (ECGI)

Howard Jones

University of Oxford, Saïd Business School

Jose Vicente Martinez

University of Connecticut

Date Written: December 20, 2019

Abstract

Individuals increasingly buy mutual funds via on-line platforms, whose ‘best buy’ recommendations heavily influence flows. As intermediaries of mutual funds, platforms provide none of the unobservable interaction or intangible benefits of brokers, and so allow clean tests of the determinants, influence, and value, of their fund recommendations. Using unique U.K. data, we find that platforms favor ‘own brand’ funds and those paying them a higher commission share. Investors discount own-brand recommendations, but not those paying high commission shares (which were not observable in the UK). A regulatory ban on commission-sharing lowered costs and improved the informativeness of platform recommendations.

Keywords: Mutual Funds, Investment Platforms, Recommendations

JEL Classification: G11, G20

Suggested Citation

Cookson, Gordon and Jenkinson, Tim and Jones, Howard and Martinez, Jose Vicente, Best Buys and Own Brands: Investment Platforms’ Recommendations of Mutual Funds (December 20, 2019). Available at SSRN: https://ssrn.com/abstract=3024128 or http://dx.doi.org/10.2139/ssrn.3024128

Gordon Cookson

KPMG LLP ( email )

London
United Kingdom

Tim Jenkinson (Contact Author)

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
United Kingdom
+44 1865 288916 (Phone)
+44 1865 288831 (Fax)

HOME PAGE: http://www.sbs.oxford.edu/timjenkinson

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Howard Jones

University of Oxford, Saïd Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

HOME PAGE: http://www.sbs.ox.ac.uk/research/people/Pages/HowardJones.aspx

Jose Vicente Martinez

University of Connecticut ( email )

2100 Hillside Road, Unit 1041
Storrs, CT 06269
United States

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