Do Financial Advisors Charge Sustainable Investors a Premium?

151 Pages Posted: 19 Jul 2021 Last revised: 10 Jun 2023

See all articles by Marten Laudi

Marten Laudi

University of Bremen - Faculty of Business Studies and Economics

Paul Smeets

University of Amsterdam

Utz Weitzel

VU University Amsterdam

Multiple version iconThere are 2 versions of this paper

Date Written: June 9, 2022

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

Suggested Citation

Laudi, Marten and Smeets, Paul and Weitzel, Utz, Do Financial Advisors Charge Sustainable Investors a Premium? (June 9, 2022). Available at SSRN: https://ssrn.com/abstract=3887716 or http://dx.doi.org/10.2139/ssrn.3887716

Marten Laudi

University of Bremen - Faculty of Business Studies and Economics ( email )

Bremen, D-28359
Germany

HOME PAGE: http://martenlaudi.com

Paul Smeets (Contact Author)

University of Amsterdam ( email )

Plantage Muidergracht 12
Amsterdam, 1018TV
Netherlands

Utz Weitzel

VU University Amsterdam ( email )

De Boelelaan 1105
Amsterdam
Netherlands

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