Should You Hire a Financial Advisor?

Should You Hire a Financial Advisor?

In this episode, hosts Kate Holland and Veljko Fotak weight the costs and benefits of hiring a financial advisor. How much do advisors really cost? Do advisors lead to higher returns? How common is fraud? What are the mistakes people make in selecting advisors—and what mistakes do advisors make themselves? The conversation touches upon those questions and much more and, as always, the discussion is rooted in the latest academic research!

 

Timeline:

00:00 Should You Hire a Financial Advisor?

04:02 Welcome to Questions in Finance

04:39 Retirement Got Complicated

14:28 RIAs, CFPs, CFAs, and More Alphabet Soups

21:37 No, They Underperform

32:54 Yes, Advisors Get Investors from Cash to Stocks

42:34 No, there is Too Much Fraud

44:52 Yes, They Reduce Anxiety

51:10 Yes, They Provide a Variety of Services

55:58 No, Advice is not Customized

01:07:21 So, Who Should Get an Advisor? 

 

Bibliography:

Bergstresser, Daniel, John MR Chalmers, and Peter Tufano. "Assessing the costs and benefits of brokers in the mutual fund industry." The Review of Financial Studies 22, no. 10 (2008): 4129-4156.

Bhattacharya, Utpal, Andreas Hackethal, Simon Kaesler, Benjamin Loos, and Steffen Meyer. "Is unbiased financial advice to retail investors sufficient? Answers from a large field study." The Review of Financial Studies 25, no. 4 (2012): 975-1032.

Cici, Gjergji, Alexander Kempf, and Christoph Sorhage. "Do financial advisors provide tangible benefits for investors? Evidence from tax-motivated mutual fund flows." Review of Finance 21, no. 2 (2017): 637-665.

Egan, Mark, Shan Ge, and Johnny Tang. "Conflicting interests and the effect of fiduciary duty: Evidence from variable annuities." The Review of Financial Studies 35, no. 12 (2022): 5334-5386.

Egan, Mark, Gregor Matvos, and Amit Seru. "The market for financial adviser misconduct." Journal of Political Economy 127, no. 1 (2019): 233-295.

Foerster, Stephen, Juhani T. Linnainmaa, Brian T. Melzer, and Alessandro Previtero. "Retail financial advice: does one size fit all?." The Journal of Finance 72, no. 4 (2017): 1441-1482.

Gaudecker, Hans‐Martin Von. "How does household portfolio diversification vary with financial literacy and financial advice?." The Journal of Finance 70, no. 2 (2015): 489-507.

Gennaioli, Nicola, Andrei Shleifer, and Robert Vishny. "Money doctors." The Journal of Finance 70, no. 1 (2015): 91-114.

Guercio, Diane Del, and Jonathan Reuter. "Mutual fund performance and the incentive to generate alpha." The Journal of Finance 69, no. 4 (2014): 1673-1704.

Linnainmaa, Juhani T., Brian T. Melzer, and Alessandro Previtero. "The misguided beliefs of financial advisors." The Journal of Finance 76, no. 2 (2021): 587-621.

Stoughton, Neal M., Youchang Wu, and Josef Zechner. "Intermediated investment management." The Journal of Finance 66, no. 3 (2011): 947-980. 

 

Soundtrack:

The soundtrack is based on "Walk on a Funky Street" by MondayHopes. Thanks for the music and keep up the good work! Use is under the Pixabay Content License.