Canadian Capitalist Logo Dark
No Result
View All Result
Monday, September 25, 2023
  • Login
  • Register
  • Home
  • Economy
  • Investing
  • Markets
  • Real Estate
  • Retirement
  • Tax Savings
  • Trivia
  • Resources
Subscribe
Canadian Capitalist Logo Light
  • Home
  • Economy
  • Investing
  • Markets
  • Real Estate
  • Retirement
  • Tax Savings
  • Trivia
  • Resources
No Result
View All Result
Canadian Capitalist Logo Mobile
No Result
View All Result
Home Uncategorised

Do Advisors Add Investment Value?

by Ram Balakrishnan
August 30, 2010
Reading Time: 2 mins read
127 6
0
when stock splits does dividend split
152
SHARES
1.9k
VIEWS
Share on FacebookShare on TwitterShare on Linkedin

A recent research paper out of Germany provides ammunition to those who question the value of investment advice. The paper titled “Financial Advisors: A Case of Babysitters?” analyzed two sets of data: 32,751 randomly selected internet brokerage accounts over a 66 month period and 10,434 randomly selected clients of a bank covering a 34-month period. A portion of clients both at the internet broker and the bank optionally worked with an advisor. The researchers analyzed the performance records of independent advisors from the first set and that of bank financial advisors from the second set to answer questions like whether advisors tend to be matched with poorer, uninformed investors or with richer, experienced ones and how advised accounts perform relative to non-advised ones.

The researchers found that advisors are more likely to make successful matches with older, more experienced, single, female investors rather than younger, inexperienced investors. They also found that advised clients get lower net returns and lower risk-adjusted net returns than they could have achieved on their own. In other words, on average the cost of financial advice exceeded the benefits that advisors can provide. And consistent with the incentive structure of advisors, the researchers found that advised accounts trade more and have higher turnover.

Since advisors are matched with richer, older and more experienced investors, the researchers liken them to babysitters:

In this respect, advisors are similar to babysitters: babysitters are matched with well-to-do households, they perform a service that parents themselves could do better, they charge for it, but observed child achievement is often better than what people without babysitters obtain, because other contributing factors are favorable.

The research paper is available here. A tip of the hat to Ken Kivenko of CanadianFundWatch.com for pointing to the research.

Related posts:

  1. Finding a Financial Advisor, Part 1
  2. Carnival of Debt Reduction # 19
  3. The Income Tax Cut is Better
  4. This and That
Share61Tweet38Share11

Get real time update about this post categories directly on your device, subscribe now.

Unsubscribe
Previous Post

This and That: Burton Malkiel and more…

Next Post

Free Download of The Elements of Investing

Ram Balakrishnan

Ram Balakrishnan

Related Posts

Why you cant afford a house in Canada

Why You Can’t Afford A Home In Canada?

January 24, 2022
444
investing benefits
Investing

Finding a Financial Advisor, Part 1

June 19, 2021
2.1k
investing in bitcoin

Is it time to invest in Bitcoins again?

May 13, 2019
2k
when do reits liquidate
Uncategorised

Performance of Currency-Neutral S&P 500 Index Funds

January 19, 2014
2k
is mortgage interest tax deductible
Uncategorised

The 2013 Sleepy Portfolio Report Card

January 12, 2014
2k
how to buy individual stocks in canada
Uncategorised

Asset Class Returns for 2013

January 5, 2014
1.9k
Next Post
Free Download of The Elements of Investing

Free Download of The Elements of Investing

Please login to join discussion
Canadian Capitalist

© 2022 Canadian Capitalist

Navigate Site

  • Home
  • Disclaimer
  • Privacy Policy
  • Advertisement
  • Contact Us

Follow Us

No Result
View All Result
  • Home
  • Economy
  • Investing
  • Markets
  • Real Estate
  • Retirement
  • Tax Savings
  • Trivia
  • Resources

© 2022 Canadian Capitalist

Welcome Back!

Sign In with Facebook
Sign In with Google
Sign In with Linked In
OR

Login to your account below

Forgotten Password? Sign Up

Create New Account!

Sign Up with Facebook
Sign Up with Google
Sign Up with Linked In
OR

Fill the forms below to register

*By registering into our website, you agree to the Terms & Conditions and Privacy Policy.
All fields are required. Log In

Retrieve your password

Please enter your username or email address to reset your password.

Log In
This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.
two man and woman standing on doorway
The man who does not read has no advantage over the man who cannot read - Mark Twain