Quote:
Originally Posted by manaboutown
This is an extraordinary 2012 study that confirms my belief that some if not many financial advisors are primarily commission driven and act in their own self interests to generate fees, ahead of the best interests of their clients. The paper is quite detailed and lengthy, containing disturbing findings IMO.
"Do financial advisers undo or reinforce the behavioral 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 behavior and push for actively managed funds that have higher fees, even if the client starts with a well-diversified, low-fee portfolio."
The actual paper is in a PDF.
The Market for Financial Advice: An Audit Study | NBER |
As has been said before, there are good and bad advisors. I’ve had one for 30 years and appreciate his expertise and advice. He makes a percentage of my total portfolio value, so if I make more, he makes more and his percentage decreases as my portfolio crosses certain value thresholds. Seems reasonable to me. Some people enjoy managing money. I do not.