Annika Weber

6th of February 2017

Jours fixe takes place on the first monday of the month, starting at 5:00 p.m., in  HoF E.20 / DZ Bank of the House of Finance (Campus Westend).

[Annika Weber, E-Finance Lab]

Client Involvement in Expert Advice - Antibiotics in Finance?

We examine detailed minutes on over 20,000 advisory sessions at a large German bank and link them to information on client portfolio holdings, security transactions, and the degree to which they make use of financial advice. Rather passive clients who consult their advisor for all their investment decisions tend to obtain standard recommendations on actively managed diversified mutual funds. More active clients who seek advice only occasionally and otherwise invest autonomously tend to make their advisor deviate from bank standards and agree on purchasing products with high idiosyncratic risk. Our evidence suggests that individual investors who enter advisory sessions with a prior on investment strategies compromise the quality of advice and end up holding less diversified portfolios. Our findings parallel the phenomenon of doctors prescribing antibiotics on patient request, even if inappropriate.