"Conflicts of Interest Between Employers and Employees in Mutual Fund Families: Evidence from 401(k) Plans", Job Market Paper
Fund families are financially sophisticated and have superior information about the skills of their fund managers. I examine whether they put their outperforming funds in 401(k) plans for their employees. I find that the performance of proprietary funds included in these plans ranks only at the 40th percentile within the same investment style across all funds managed by fund families. In addition, I show that style-adjusted expense ratios (returns) of proprietary funds in fund families’ 401(k) plans are higher (lower) than those of proprietary funds in their clients’ 401(k) plans. The results suggest that fund families do not fully exploit information advantage regarding their fund managers’ skills but instead prioritize generating profits from employees. These conflicts are stronger if a fund family is publicly traded and are attenuated when it uses company profits to increase retirement savings of employees.
Seminar at University of Kansas (2025); Silicon Prairie Conference (2025)
"Conflicts of Interest among Affiliated Financial Advisors in 401(k) Plans: Implications for Plan Participants", (with Gjergji Cici and William Bazley)
Institutional features of 401(k) plans can give rise to conflicts of interest between plan participants and financial advisors that advise them. We study one such conflict that arises when advisors are affiliated with the plan’s recordkeeper. Using a large dataset of 401(k) plans, we find that affiliated advisors reduce investment performance by steering participant flows to proprietary funds. We observe no similar effects for unaffiliated advisors. Additionally, affiliated advisors provide no significant benefits in terms of participation rates, administrative fees, or diversification. Given the increasing prevalence of advisors within 401(k) plans, our findings have relevant implications for households, plan sponsors, and policymakers.
SFA (2025, scheduled); FMA (2025, scheduled); FBA (2025)
Revise and Resubmit at The Journal of Finance
“The Role of Financial Advisors in Improving Asset Allocation in 401(k) Plans”
An increasing number of employers hire financial advisors in their 401(k) plans to help plan participants make asset allocation decisions, as employees often struggle to manage their portfolios due to limited financial literacy. I examine whether financial advisors improve participants’ asset allocations in 401(k) plans and which types of advisors provide the greatest benefits. I find that advisors help participants increase allocations to index funds, enhance international diversification, and reduce holdings in cash and target-date funds. Advisors in 401(k) plans are typically compensated through asset-based fees rather than product-specific commissions, giving them incentives to maximize assets under their management by improving participants’ portfolios. Consistent with this mechanism, I show that advisors compensated solely through asset-based fees deliver greater benefits to participants than other advisors.