Article,
Switching from commissions on mutual funds to flat-fees: How are advisory clients affected?
Affiliations
- [1] Aarhus University [NORA names: AU Aarhus University; University; Denmark; Europe, EU; Nordic; OECD];
- [2] UNSW Sydney [NORA names: Australia; Oceania; OECD];
- [3] Goethe University Frankfurt [NORA names: Germany; Europe, EU; OECD]
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.
Keywords
Commission,
advice,
advisor recommendations,
advisors,
advisory services,
behavior,
brokerage,
clients,
difference-in-differences setting,
diversification,
field,
field study,
financial advice,
flat-fee,
funding,
high quality,
individual investor behavior,
investor behavior,
mutual funds,
outcomes,
performance,
portfolio,
portfolio diversification,
portfolio performance,
portfolio value,
quality,
recommendations,
self-selection,
services,
sets,
study,
switchers,
values