The PREF Research Initiative “Prise de Risque des Épargnants Français” organised, in partnership with the University of Orléans, the Institut Louis Bachelier (ILB) and Yomoni, a workshop on Financial advice, Profiling and Portfolio Choice of Households, which took place on 8 December at the ILB. This academic event was part of the ILB’s Finance and Insurance Reloaded (FaIR) programme. 

The workshop presented recent work on the issues of financial advice, profiling and portfolio choice of households and the impact of the introduction of robo advisors. The papers presented during the event raised current issues on the subject, in particular the question of the delegation of portfolio choice, the future of financial profiling between human advice and algorithmic advice.  

Physical financial advisors and their clients

The day was introduced by Yomoni, the industrial partner of the “PREF” research initiative, represented by its COO Clément Berlioz. Clément Berlioz highlighted and illustrated the issues related to financial advice, profiling and portfolio choices of households.

The guest researchers then presented their work. Matthias Stefan from the University of Innsbruck in Austria presented his work You can’t always get what you want-An experiment on finance professionals’ decisions for others, co-authored with Martin Holmén (University of Gothenburg), Felix Holzmeister (University of Innsbruck), Michael Kirchler (Lund University) and Erik Wengström (Hanken School of Economics). Their work shows that financial professionals exhibit higher decision quality than the general population when investing for their own account, but that when deciding on behalf of clients, the professionals’ decision quality does not differ significantly from that of their clients.  

Do robo-advisors take more account of household preferences?

Béatrice Boulu-Reshef (University of Orléans, LEO) presented her paper Algorithmic vs. Human Portfolio Choice, co-authored with Alexis Direr (University of Orléans, LEO) and Nicole von Wilczur (Ayolab). This paper studies the interaction between portfolio recommendations made by a robo-advisor, in this case Yomoni, and its users and then allows them to choose their risk exposure after receiving this recommendation. The results show that the risk profiles recommended by the robo-advisor are qualitatively aligned with financial portfolio theory and that, although a variety of information is used by the algorithm, the recommendation is strongly based on responses regarding financial risk taking.

Then, Marie Brière (Amundi Asset Management, Université Paris Dauphine) presented her paper Augmenting Investment Decisions with Robo-Advice, co-authored with Milo Bianchi (Toulouse School of Economics). This paper analyses the implementation of a robo-advisor in the framework of Amundi’s employee savings plans. It shows that this service increases investors’ attention to their savings plan as well as their exposure to equity markets and changes the portfolio rebalancing dynamics by sending alerts. These changes improve the performance of advised portfolios, especially for smaller investors who rarely have access to financial advice.

Indigo Jentry Jones (University of Orleans, LEO) presented his paper “Who invests on behalf of their children and how? evidence from a robo-advisor”, co-authored with Alexis Direr, which studies the investment behaviour of parents for their children. He shows the existence of gender bias and similarity between the risk profiles of parents and children.

Finally, Philippe d’Astous (HEC Montréal) presented his paper The Quality of Financial Advice: What Influences Client Recommendations? co-authored with Irina Gemmo (HEC Montréal) and Pierre-Carl Michaud (HEC Montréal), which shows that financial recommendations are often in line with what one would expect based on economic theory. In particular, advisors are sensitive, in the expected way, to the relative costs and benefits of investment options. In particular, their work illustrates that advisers are more likely to recommend products that they own themselves, that their spouse owns, or that they are licensed to sell.

Excellent discussions of the above papers were given by Hela Maafi (Université Paris 8, Vincennes-Saint Denis), Sylvain Carré (Université Paris-Dauphine PSL), Frédéric Loss (ENSAE Paris), Luc Arrondel (Paris School of Economics) and Thomas Renault (Université Paris 1 Panthéon-Sorbonne).