Investment preferences and risk perception: Financial agents versus clients
Kling,Luisa Koenig-Kersting,Christian Trautmann,Stefan T.
Kling,Luisa
Koenig-Kersting,Christian
Trautmann,Stefan T.
Abstract
We study four fundamental components of financial agency settings: The perception of commonly used investment profile terminology, agents' customization of portfolios to clients' preferences, the effect of agents' and clients' preferences on investment levels, and the role of compensation schemes. We observe large heterogeneity in the perception of investment profiles, resulting in substantial miscommunication between clients and agents. Financial agents show a high willingness to implement their clients' preferred investment profiles, yet appear to fail because of deviating perceptions. Agents' own investment preferences matter, but take a back seat to clients' preferences in determining investment shares. Different monetary incentive schemes hardly affect behavior. Our results suggest that moral constraints can limit agents' discretion in the agency situation. & COPY; 2022 The Author(s). Published by Elsevier B.V. This is an open access article under the CC BY license ( http://creativecommons.org/licenses/by/4.0/ )
Description
Date
2023-09
Journal Title
Journal ISSN
Volume Title
Publisher
Research Projects
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Journal Issue
Keywords
Decisions of agents, Decisions under risk, Financial advice, Risk perception
Citation
Kling, L, Koenig-Kersting, C & Trautmann, S T 2023, 'Investment preferences and risk perception : Financial agents versus clients', Journal of Banking & Finance, vol. 154, 106489. https://doi.org/10.1016/j.jbankfin.2022.106489