Investors trading stocks with assistance of financial advisers are more diversified and overcome some common pitfalls, a new working paper from European researchers found.
But they are worse off overall than investors who trade independently, because their stock purchases underperform, the study says.
The findings suggest advisers “do not help investors make superior stock purchases,” wrote the researchers, who examined client transactions at a large, unidentified Swiss bank.
There was “consistent evidence” that stock trades made by investors in conjunction with an adviser underperformed benchmarks as well as trades investors made independently, the researchers say.
Moreover, the underperformance was “particularly severe if the client-advisor contact was initiated by the adviser, suggesting that advisers actively approach clients with rather poor trading ideas,” the paper says.
On the plus side, the researchers found that clients who made trades in conjunction with an adviser were better diversified, less likely to show a bias toward local stocks and less likely to hold on to losing stocks while selling winners. However, these positive effects weren’t enough to overcome the negative impact of advisers’ stock choices, the researchers said.
More here – The Wall Street Journal
The message, dont listen to sell side advisors.