Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/181655 
Year of Publication: 
2018
Series/Report no.: 
SAFE Working Paper No. 219
Publisher: 
Goethe University Frankfurt, SAFE - Sustainable Architecture for Finance in Europe, Frankfurt a. M.
Abstract: 
We use minutes from 17,000 financial advisory sessions and corresponding client portfolio data to study how client involvement affects advisor recommendations and portfolio outcomes. We find that advisors confronted with acquiescent clients stick to standards and recommend expensive but well diversified mutual fund portfolios. However, if advisors meet with clients who voice own ideas they deviate markedly from their standards, resulting in poorer portfolio diversification and lower Sharpe ratios. Our findings that advisors cater to client requests parallel the phenomenon of doctors prescribing antibiotics to insistent patients even if inappropriate, and imply that pandering diminishes the quality of advice.
Subjects: 
financial advice
individual investors
client involvement
JEL: 
D14
G11
G21
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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