Do Financial Advisors Exploit Responsible Investment Preferences?

94 Pages Posted: 19 Jul 2021

See all articles by Marten Laudi

Marten Laudi

Maastricht University

Paul Smeets

Maastricht University

Utz Weitzel

VU University Amsterdam; Tinbergen Institute; Radboud University

Multiple version iconThere are 2 versions of this paper

Date Written: July 16, 2021

Abstract

An unprecedented number of investors are giving their financial advisors a mandate for socially responsible investing (SRI). Yet, the impact of SRI mandates on consumers is unclear. In a pre-registered lab-in-the-field experiment with 345 professional advisors, we find that advisors charge a premium to SRI clients that cannot be justified by higher effort, skill, or costs. This suggests that advisors exploit the SRI preferences of their clients (who accept these higher fees). In an independent survey, financial regulators predict higher SRI fees but do not predict exploitation. Regulators confirm that our findings are externally valid and require attention from policymakers.

Keywords: Experimental Finance, Financial Advice, Socially Responsible Investments

JEL Classification: C93, G11

Suggested Citation

Laudi, Marten and Smeets, Paul and Weitzel, Utz, Do Financial Advisors Exploit Responsible Investment Preferences? (July 16, 2021). Available at SSRN: https://ssrn.com/abstract=3887716 or http://dx.doi.org/10.2139/ssrn.3887716

Marten Laudi

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200MD
Netherlands

Paul Smeets (Contact Author)

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200MD
Netherlands
+31433883643 (Phone)

Utz Weitzel

VU University Amsterdam ( email )

De Boelelaan 1105
Amsterdam
Netherlands

Tinbergen Institute ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

Radboud University ( email )

Heyendaalseweg 141
Nijmegen, 6525 AJ
Netherlands

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