Variations in Investment Advice Provision: A Study of Financial Advisors of Millionaire Investors

44 Pages Posted: 6 Nov 2019

See all articles by Ylva Baeckstrom

Ylva Baeckstrom

King's Business School, King's College London

Ian W. Marsh

City University London - Sir John Cass Business School

Jo Silvester

City University London - Sir John Cass Business School

Date Written: November 11, 2018

Abstract

We analyse portfolio recommendations and judgements about the investment knowledge and control of fictitious but plausible millionaire clients made by a panel of professional investment advisors. Using the vignette methodology in which we describe millionaire investors in pen portraits, we exactly control the information set given to each advisor about the would-be clients. Investor characteristics contribute to the portfolio recommendations in ways broadly in line with expectations. However advisor characteristics are at least as important. Experienced advisors and those with wealthier clients recommend higher risk portfolios, as do the very youngest category of advisors. Unmeasured advisor variables drive both judgements made about clients and the recommendations made. Female clients are judged to be less knowledgeable and less in control than equivalent male investors yet both genders receive the same investment advice. We conclude that millionaire investors receive very different investment advice depending on who their advisor is. These findings have relevance to the wealth management industry and financial market regulators who monitor advisor activities.

Keywords: investment advice, portfolios, risk tolerance, vignette, financial advisors, gender

JEL Classification: G21, G12, G41

Suggested Citation

Baeckstrom, Ylva and Marsh, Ian William and Silvester, Jo, Variations in Investment Advice Provision: A Study of Financial Advisors of Millionaire Investors (November 11, 2018). Available at SSRN: https://ssrn.com/abstract=3286519 or http://dx.doi.org/10.2139/ssrn.3286519

Ylva Baeckstrom (Contact Author)

King's Business School, King's College London ( email )

Bush House
30 Aldwych
London, WC2b 4BG
United Kingdom

HOME PAGE: http://https://www.kcl.ac.uk/people/ylva-baeckstrom

Ian William Marsh

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+44 20 7040 5121 (Phone)
+44 20 7040 8881 (Fax)

HOME PAGE: http://www.cass.city.ac.uk/faculty/i.marsh

Jo Silvester

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

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