Delegation Decisions in Finance

Abstract

Based on an online experiment with a sample of finance professionals and participants from the general population (acting as clients), we examine drivers and motives of clients' choices to delegate investment decisions to agents. We find that clients favor delegation to investment algorithms, followed by delegation to finance professionals compensated with an aligned incentive scheme, and lastly to finance professionals receiving a fixed payment for investing on behalf of others. We show that trust in investment algorithms or finance professionals, and clients' propensity to shift blame on others increase the likelihood of delegation, whereas clients' own decision-making quality is associated with a decrease in delegation frequency.

Keywords: experimental finance, finance professionals, delegation decisions

JEL Classification: C93, G11, G41