Do financial advisors provide tangible benefits for investors? Evidence from tax-motivated mutual fund flows

Rationality suggests that advice-seeking investors receive benefits from financial advice that are comparable in value to the fees paid for such advice. However, empirical evidence documenting these benefits for U.S. investors has so far been lacking. We document that U.S. mutual fund investors indeed receive one of the many previously hypothesized benefits in the form of valuable tax-management advice that helps avoid taxable fund distributions. This benefit is economically significant and becomes even more valuable when investors face large and hard-to-predict tax liabilities. Additional evidence suggests that financial advice helps with other aspects of tax management such as tax-loss selling.