Ask for Advisor’s Personal Investing Performance?

Are financial advisors expert guides for their client investors? In their December 2017 paper entitled “The Misguided Beliefs of Financial Advisors”, Juhani Linnainmaa, Brian Melzer and Alessandro Previtero compare investing practices/results of Canadian financial advisors to those of their clients, including trading patterns, fees and returns. They estimate account alphas via multi-factor models. Using detailed data from two large Canadian mutual fund dealers (accounting for about 5% of their sector) for 3,276 Canadian financial advisors and their 488,263 clients, and returns and fees for 3,023 associated mutual funds, during January 1999 through December 2013, they find that:

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