Non-exclusive financial advice

Publication Type:
Journal Article
Review of Finance, 2016, 20 (6), pp. 2079 - 2123
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© 2016 The Authors 2015. Published by Oxford University Press on behalf of the European Finance Association. We propose a simple model of non-exclusive financial advice in which two households rely on a self-interested (common) expert to make their investment choices. There is only one source of risk, and the expert is privately informed about the risky asset's volatility. When monetary transfers are unenforceable, we show that investors may delegate their investment decisions to the expert. When doing so, however, they impose restrictions on her choices which crucially depend on whether the expert perceives investors' asset allocations as complements or as substitutes. Finally, we analyze the implications of non-exclusivity in financial advice on investment behavior and welfare, and highlight a set of novel testable implications.
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