Just Wolfers just tweeted out a link to this new article published by the National Bureau of Economic Research.Financial advisors do not do what’s in the best interest of their clients, according to researchers: Sendhil Mullainathan, Markus Noeth, Antoinette Schoar.
Here’s the abstract of the paper
Do financial advisers undo or reinforce the behavioural biases and misconceptions of their clients? We use an audit methodology where trained auditors meet with financial advisers and present different types of portfolios. These portfolios reflect either biases that are in line with the financial interests of the advisers (e.g., returns-chasing portfolio) or run counter to their interests (e.g., a portfolio with company stock or very low-fee index funds). We document that advisers fail to de-bias their clients and often reinforce biases that are in their interests. Advisers encourage returns-chasing behaviour and push for actively managed funds that have higher fees, even if the client starts with a well-diversified, low-fee portfolio.
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