Do Financial Advisors Exploit Responsible Investment Preferences?

Tinbergen Institute Discussion Paper 2021-070/IV

96 Pages Posted: 22 Jul 2021

See all articles by Utz Weitzel

Utz Weitzel

VU University Amsterdam

Marten Laudi

Maastricht University

Paul Smeets

University of Amsterdam

Multiple version iconThere are 2 versions of this paper

Date Written: July 20, 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: G11, C93

Suggested Citation

Weitzel, Utz and Laudi, Marten and Smeets, Paul, Do Financial Advisors Exploit Responsible Investment Preferences? (July 20, 2021). Tinbergen Institute Discussion Paper 2021-070/IV, Available at SSRN: https://ssrn.com/abstract=3890116 or http://dx.doi.org/10.2139/ssrn.3890116

Utz Weitzel (Contact Author)

VU University Amsterdam ( email )

De Boelelaan 1105
Amsterdam
Netherlands

Marten Laudi

Maastricht University ( email )

P.O. Box 616
Maastricht, Limburg 6200MD
Netherlands

Paul Smeets

University of Amsterdam ( email )

Plantage Muidergracht 12
Amsterdam, 1018TV
Netherlands

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