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."
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The world has changed alot in the last 10+ years.
I would postulate that many financial advisors
now sell etf portfolios, as actively managed portfolios are much less tax efficient. And the track record for efts as investable products against the tracking index, is available historically and documentable, versus active management funds.