Battiston, Diego, Blanes I Vidal, Jordi ORCID: 0009-0002-9237-2049, Hortala-Vallve, Rafael
ORCID: 0000-0002-9677-497X and Lou, Dong
ORCID: 0000-0002-5623-4338
(2025)
The effect of advisors' incentives on clients' investments.
Journal of Finance.
ISSN 0022-1082
(In Press)
![]() |
Text (InvestmentBank21_merged)
- Accepted Version
Pending embargo until 1 January 2100. Available under License Creative Commons Attribution. Download (2MB) |
Abstract
We use granular data from an investment firm and a credible identification strategy to estimate the effect of financial advisors’ incentives on client investments. Exploiting a natural experiment triggered by the 2018 implementation of MiFID II, we find that clients’ investments respond strongly to changes in advisor incentives. Advisors react through multiple mechanisms: (a) inducing existing clients to bring in new money, (b) channeling it to high-incentive funds, and (c) attracting more new clients. We also find that the MiFID II reform generated more balanced incentives, which translated into higher portfolio efficiency through both lower average fees and stronger portfolio diversification.
Actions (login required)
![]() |
View Item |