IDEAS home Printed from https://ideas.repec.org/p/red/sed019/1585.html
   My bibliography  Save this paper

Disruption and Competition in the Financial Advisory Market

Author

Listed:
  • Antje Berndt

    (Australian National University)

  • Sevin Yeltekin

    (Carnegie Mellon University)

Abstract

We propose a model of entry and competition in the financial advisory market. Firms are heterogeneous with regard to the level of customization they offer to their clients. Customization measures advisors’ capacity to tailor their services, including the frequency of human interactions, towards individual clients’ needs. Low-customization firms such as robo advisors specialize in fully automated portfolio investing, whereas high-customization firms offer a higher level of human touch and provide more comprehensive and tailored wealth management services. Our model is able to generate stylized market features which we document, including high levels of concentration and low market participation in the absence of innovation and better price-quality tradeoffs and higher market participation when innovators enter. We use our framework to discuss the welfare implications of new digital technologies emerging and new entrants—such as RoboAdvisors—disrupting the market.

Suggested Citation

  • Antje Berndt & Sevin Yeltekin, 2019. "Disruption and Competition in the Financial Advisory Market," 2019 Meeting Papers 1585, Society for Economic Dynamics.
    • Handle: RePEc:red:sed019:1585
    as

    Download full text from publisher

    File URL: https://red-files-public.s3.amazonaws.com/meetpapers/2019/paper_1585.pdf
    Download Restriction: no
    ---><---

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:red:sed019:1585. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christian Zimmermann (email available below). General contact details of provider: https://edirc.repec.org/data/sedddea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.