Investor Experience and Portfolio Choice

17 Pages Posted: 19 Apr 2021 Last revised: 21 Apr 2021

See all articles by Bernd Scherer

Bernd Scherer

EDHEC Business School - Department of Economics & Finance

Sebastian Lehner

University of Wuppertal - Schumpeter School of Business and Economics

Date Written: April 17, 2021

Abstract

MiFID II forces banks and wealth managers to ask clients for their investment knowledge and experience. The implied regulatory view is that less experience should result in less risk taking. While this is neither shared in theoretical nor in empirical finance, it becomes a source of legal risk for asset managers and banks. How do banks react? So far this question was impossible to answer. The relevant data have not been available as they are not shared by banks. We circumvene this problem by using publicly available portfolio recommendations from robo-advisory firms. These firms fall under the same regulations as banks and wealth managers with respect to MiFID II investor profiling and are often owned by traditional banks. It is therefore reasonable to assume that their treatment of investor experience is similar to traditional banks' approaches.

Keywords: Investor experience, financial market regulation, MiFID II, regulatory costs, robo-advisory

JEL Classification: G11, G18

Suggested Citation

Scherer, Bernd and Lehner, Sebastian, Investor Experience and Portfolio Choice (April 17, 2021). Available at SSRN: https://ssrn.com/abstract=3828373 or http://dx.doi.org/10.2139/ssrn.3828373

Bernd Scherer (Contact Author)

EDHEC Business School - Department of Economics & Finance ( email )

France

Sebastian Lehner

University of Wuppertal - Schumpeter School of Business and Economics ( email )

Rainer-Gruenter-Str. 21
Wuppertal, 42119
Germany

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