Are financial advisors useful? Evidence from tax-motivated mutual fund flows
AbstractWe are the first to show that financial advisors generate tangible benefits for their clients in the form of useful tax advice. Investors who purchase mutual funds through financial advisors exhibit a stronger tendency of avoiding taxable distributions than those who do not. Our calculations imply that this tendency could generate after-tax returns that are higher by 63 basis points per year, on average. The benefits from financial advice increase when investors face large and hard to predict tax liabilities and pay more for advice. Evidence from December distributions is consistent with financial advisors also helping clients with tax-loss selling. --
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Bibliographic InfoPaper provided by University of Cologne, Centre for Financial Research (CFR) in its series CFR Working Papers with number 12-09 [rev.2].
Date of creation: 2013
Date of revision:
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More information through EDIRC
Mutual funds; Taxable fund distributions; Financial advisors; After-tax returns;
Find related papers by JEL classification:
- D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
This paper has been announced in the following NEP Reports:
- NEP-ACC-2013-09-06 (Accounting & Auditing)
- NEP-ALL-2013-09-06 (All new papers)
- NEP-PBE-2013-09-06 (Public Economics)
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