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

76 Pages Posted: 6 Nov 2019 Last revised: 13 Aug 2021

See all articles by Ylva Baeckström

Ylva Baeckström

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: May 3, 2021

Abstract

Vignette methodology is used to examine how the personal characteristics of investors
and financial advisors contribute to portfolio recommendations, and the judgements
that advisors make about investment knowledge and control of prospective millionaire UK
clients. We find that advisors use investor characteristics to make recommendations broadly
in line with economic theory and regulatory requirements. However, women are judged less
knowledgeable and in control of their investments than equivalent men. They also receive
portfolio recommendations with slightly lower risk profiles. Portfolio recommendations vary
by advisor, with experienced advisors and those with wealthier clients recommending higher
risk portfolios. Unmeasured advisor variables also impact on judgements and recommendations.
These findings have relevance to the wealth management industry and regulators, in
focusing attention on the conscious and unconscious influences on the judgements advisors
make about their clients.

Keywords: financial advice; investors; risk tolerance; vignette; financial advisors; gender

JEL Classification: G21, G12, G41

Suggested Citation

Baeckström, Ylva and Marsh, Ian William and Silvester, Jo, Variations in Investment Advice Provision: A Study of Financial Advisors of Millionaire Investors (May 3, 2021). Journal of Economic Behavior and Organization, Vol. 188, 2021, Available at SSRN: https://ssrn.com/abstract=3286519 or http://dx.doi.org/10.2139/ssrn.3286519

Ylva Baeckström (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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