Same bank, same clients but different pricing: How do flat-fees for mutual funds affect retail investors

Benjamin Loos; Steffen Meyer; Charline Uhr; Andreas Hackethal

Same bank, same clients but different pricing: How do flat-fees for mutual funds affect retail investors

Benjamin Loos, Steffen Meyer^*, Charline Uhr, Andreas Hackethal

^*Corresponding author for this work

Research output: Contribution to conference without publisher/journal › Paper › Research › peer-review

Abstract

What happens when a bank introduces a flat-fee pricing scheme for trading mutual funds to its brokerage clients while leaving everything else unchanged? Only 1.26% of clients adopt the fee scheme. Adopters have been using financial advice and are less prone to inertia. Difference-in-differences analyses of previously advised clients reveal that flat-fee clients seek and follow more advice and improve their portfolio efficiency. A second field experiment, with a large branch bank replicates the main results. We suggest that flat-fees increase trust in advisor quality and reject alternative explanations, like cost-advantages, sunk-cost fallacy, novelty effects or advisor (time) fixed effects.

Original language	English
Publication date	2020
Number of pages	75
Publication status	Published - 2020
Event	American Finance Association Meetings: 2020 - USA, San Diego Duration: 2. Jan 2020 → 5. Jan 2020

Conference

Conference	American Finance Association Meetings
Location	USA
City	San Diego
Period	02/01/2020 → 05/01/2020

Keywords

Asset allocation
Financial Advice

Documents & Links

https://www.aeaweb.org/conference/2020/preliminary/paper/hkGtbhnf

Cite this

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title = "Same bank, same clients but different pricing: How do flat-fees for mutual funds affect retail investors",

abstract = "What happens when a bank introduces a flat-fee pricing scheme for trading mutual funds to its brokerage clients while leaving everything else unchanged? Only 1.26% of clients adopt the fee scheme. Adopters have been using financial advice and are less prone to inertia. Difference-in-differences analyses of previously advised clients reveal that flat-fee clients seek and follow more advice and improve their portfolio efficiency. A second field experiment, with a large branch bank replicates the main results. We suggest that flat-fees increase trust in advisor quality and reject alternative explanations, like cost-advantages, sunk-cost fallacy, novelty effects or advisor (time) fixed effects.",

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author = "Benjamin Loos and Steffen Meyer and Charline Uhr and Andreas Hackethal",

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AU - Loos, Benjamin

AU - Meyer, Steffen

AU - Uhr, Charline

AU - Hackethal, Andreas

PY - 2020

Y1 - 2020

N2 - What happens when a bank introduces a flat-fee pricing scheme for trading mutual funds to its brokerage clients while leaving everything else unchanged? Only 1.26% of clients adopt the fee scheme. Adopters have been using financial advice and are less prone to inertia. Difference-in-differences analyses of previously advised clients reveal that flat-fee clients seek and follow more advice and improve their portfolio efficiency. A second field experiment, with a large branch bank replicates the main results. We suggest that flat-fees increase trust in advisor quality and reject alternative explanations, like cost-advantages, sunk-cost fallacy, novelty effects or advisor (time) fixed effects.

AB - What happens when a bank introduces a flat-fee pricing scheme for trading mutual funds to its brokerage clients while leaving everything else unchanged? Only 1.26% of clients adopt the fee scheme. Adopters have been using financial advice and are less prone to inertia. Difference-in-differences analyses of previously advised clients reveal that flat-fee clients seek and follow more advice and improve their portfolio efficiency. A second field experiment, with a large branch bank replicates the main results. We suggest that flat-fees increase trust in advisor quality and reject alternative explanations, like cost-advantages, sunk-cost fallacy, novelty effects or advisor (time) fixed effects.

KW - Asset allocation

KW - Financial Advice

M3 - Paper

T2 - American Finance Association Meetings

Y2 - 2 January 2020 through 5 January 2020

ER -

Same bank, same clients but different pricing: How do flat-fees for mutual funds affect retail investors

Abstract

Conference

Keywords

Documents & Links

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