Variations in Investment Advice Provision : A Study of Financial Advisors of Millionaire Investors

We analyse portfolio recommendations and judgements about the investment knowledge and control of fictitious but plausible millionaire clients made by a panel of professional investment advisors. Using the vignette methodology in which we describe millionaire investors in pen portraits, we exactly control the information set given to each advisor about the would-be clients. Investor characteristics contribute to the portfolio recommendations in ways broadly in line with expectations. However advisor characteristics are at least as important. Experienced advisors and those with wealthier clients recommend higher risk portfolios, as do the very youngest category of advisors. Unmeasured advisor variables drive both judgements made about clients and the recommendations made. Female clients are judged to be less knowledgeable and less in control than equivalent male investors yet both genders receive the same investment advice. We conclude that millionaire investors receive very different investment advice depending on who their advisor is. These findings have relevance to the wealth management industry and financial market regulators who monitor advisor activities