The Misguided Beliefs of Financial Advisors

A common view of retail finance is that conflicts of interest contribute to the high cost of advice. Within a large sample of Canadian financial advisors and their clients, however, we show that advisors typically invest personally just as they advise their clients. Advisors trade frequently, chase returns, prefer expensive, actively managed funds, and underdiversify. Advisors' net returns of −3% per year are similar to their clients' net returns. Advisors do not strategically hold expensive portfolios only to convince clients to do the same; they continue to do so after they leave the industry.

Publication Date:
May 16 2018
Date Submitted:
Jun 28 2019
Journal of Finance
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 Record created 2019-06-28, last modified 2020-10-27

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