Switching from commissions on mutual funds to flat-fees: How are advisory clients affected?

Steffen Meyer*, Charline Uhr, Benjamin Loos, Andreas Hackethal

*Corresponding author for this work

Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaperJournal articleResearchpeer-review

2 Citations (Scopus)
4 Downloads (Pure)

Abstract

Using a field study at a German brokerage, we investigate advised individual investors’ behavior and outcomes after self-selecting into a flat-fee scheme (percentage of portfolio value) for mutual funds. In a difference-in-differences setting, we compare 699 switchers to propensity-score-matched advisory clients who remained in the commission-based scheme. Switchers increase their portfolio values, improve portfolio diversification, and increase their portfolio performance. They also demand more financial advice and follow more advisor recommendations. We argue that switchers attribute a higher quality to the unchanged advisory services.
Original languageEnglish
JournalJournal of Economic Behavior & Organization
Volume209
Pages (from-to)423-449
Number of pages27
ISSN0167-2681
DOIs
Publication statusPublished - May 2023

Keywords

  • Consumer financial protection
  • Financial advice
  • Household finance
  • Individual investor
  • Inducements

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