In an undercover audit of Boston-area financial advisors, three economists wanted to find out if financial advisors undo or reinforce the behavioral biases and misconceptions of their clients. “We document that advisors fail to ‘de-bias’ their clients and often reinforce biases that are in their interests,” the authors found. Sponsored by the National Bureau of Economic Research, Harvard economist Sendhil Mullainathan, Markus Noeth of the University of Hamburg and Antoinette Schoar of the MIT Sloan School of Management hired actors to pose as clients and display self-defeating investment behavior. The study focused on retail advisors at the lower end of the wealth spectrum and did not include private wealth managers or hedge funds. The specific firms and advisors were not named.
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