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

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