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How Important is Affiliation Between Mutual Funds and Distributors for Fund Flows?
[Is unbiased financial advice to retail investors sufficient? Answers from a large field study]

Author

Listed:
  • Bjarne Florentsen
  • Ulf Nielsson
  • Peter Raahauge
  • Jesper Rangvid

Abstract

We quantify the importance to mutual fund flows of affiliation between funds and their distributors. Bank failures create exogenous variation in retail customers’ exposure to bank-affiliated mutual funds. When a bank fails, its customers are moved to other banks that distribute their own affiliated mutual funds. Following such exogeneous bank shifts, customers sell their fund holdings and replace them with funds affiliated with their new banks. Customers react sequentially over time. After 4 years, a third of customers’ investments have been reallocated. In spite of large reallocations, investors do not end up with better-performing fund portfolios.

Suggested Citation

  • Bjarne Florentsen & Ulf Nielsson & Peter Raahauge & Jesper Rangvid, 2022. "How Important is Affiliation Between Mutual Funds and Distributors for Fund Flows? [Is unbiased financial advice to retail investors sufficient? Answers from a large field study]," Review of Finance, European Finance Association, vol. 26(4), pages 971-1009.
    • Handle: RePEc:oup:revfin:v:26:y:2022:i:4:p:971-1009.
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    File URL: http://hdl.handle.net/10.1093/rof/rfab035
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    References listed on IDEAS

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    More about this item

    Keywords

    Mutual funds; Retail investors; Fund flows; Distribution channel;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G01 - Financial Economics - - General - - - Financial Crises
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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