with M. Maas, T. Petersen, and M. Tyrell
Abstract:
Financial advice has often been criticised for failing to generate value in retail settings, where conflicts of interest and product-driven incentives prevail. Using a proprietary dataset of nearly 1,000 private banking portfolios observed over 40 months, we examine whether advice creates measurable value in the wealth management context and mitigates behavioural biases related to overconfidence, the disposition effect, and home bias. Our results reveal that advice significantly reduces portfolio volatility and the home bias, while it enhances diversification. Effectiveness diminishes among highly active and financially literate investors, indicating limits to behavioural correction. Overall, financial advice in the HNWI segment distinguishes itself by fee-based incentives and enduring client relationships that align advisor and client interests.Â
with A. Edeling and M. Weber