Do financial advisors provide tangible benefits for investors? Evidence from tax-motivated mutual fund flows

摘要

Rationality would suggest that advice-seeking investors receive benefits from costly financial advice. However, evidence documenting these benefits for U.S. investors has so far been lacking. This paper is the first to document that U.S. mutual fund investors indeed receive one of the many previously hypothesized benefits associated with financial advice. The documented benefit comes from valuable tax-management advice that helps investors avoid taxable fund distributions and becomes even more valuable when investors face distributions that can cause large and hard-to-predict tax liabilities. Additional evidence suggests that financial advice helps with other aspects of tax management such as tax-loss selling.