Do Financial Advisors Charge Sustainable Investors a Premium?

Abstract

Despite growing concerns from regulators about potential price discrimination against
sustainable investors, empirical evidence is lacking. To address this gap, we conduct two
lab-in-the-field experiments with 415 professional financial advisors from the US and Europe.
Our results show that these advisors impose a premium on sustainable investors
compared to conventional investors. This premium persists even when differences in
effort, skill, and costs, as well as higher gains from trade are ruled out. Notably, advisors
charge the highest fees to sustainable investors with low financial literacy, while
sustainable investors with high financial literacy pay no premium at all. These results
are consistent with price discrimination. Financial regulators evaluate our results and
provide policy implications.

Keywords: Experimental Finance, Financial Advice, Sustainable Investing, Financial Literacy

JEL Classification: C93, G11