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Investment consultant’s yield could be better

Advice often ignored by the less highly educated
12 December 2012

Investment consultants at a bank reduce the unnecessary risks for their clients. They are then in a better position than independent investors. However, the yield could be higher if the consultants were to take their employer’s interests into account less. Marc Kramer investigated the added value of investment consultants for about 16,000 clients. ‘What is remarkable is that the less highly educated are less likely to consult an advisor, although they are more in need of one.’ Kramer will be awarded a PhD by the University of Groningen on 20 December 2012.

About half of the investors in the Netherlands, large or small, make use of the advice of their bank. In the years Kramer investigated, they had on average € 50,000 to € 70,000 to play with, with the extremes from a few thousand to several million. The 16,000 or so investment portfolios that Kramer investigated revealed that investment consultants reduce the risk where there is no chance of extra yield. They carefully spread that risk. In Kramer’s view, they could do even better, but they certainly act more safely than an independent investor.


What is more important is that the advisors do not achieve higher yields. This appears to correspond with a regular experiment that apparently shows that investment consultants score no higher than a gorilla. But it’s not as simple as that, says Kramer: ‘That comparison, which is sometimes in favour of the ape, is only about “stock picking”. The advisor’s task is to compile a well-thought-out basket of investments that fit the client. The fact that there’s room for improvement is in my opinion related to the dilemma the advisor faces. The interests of the bank that employs him are not always compatible with those of his clients. For example, banks receive a sort of premium if they do business with certain investment funds. Actively managed funds are particularly popular, instead of index funds, although they are cheaper. That incentive will be gone by 2014 as legislation is tightening up on that point, and I think they will be able to serve the clients’ interests better.’

Financial illiteracy

Those who think they have a lot of financial knowledge are less likely to ask for advice. Kramer also states in his research that clients with only pre-vocational secondary education (VMBO) are much less likely to ask their bank for advice. ‘In addition, that advice is very often ignored, although you’d expect them to need it more.’ He suspects that this is related to a lack of self-knowledge in that category of people. Kramer thinks that investment advice should thus become much more automatic. ‘It should be part of a range of possibilities to stimulate better financial decisions, including financial education, choice architecture and legislation. Further, I would recommend that advisors be trained in investor psychology.’


The period investigated by Kramer covers the golden years from 2003 to 2007, with yields of up to 15% per annum. However, his conclusions also apply to the bad periods: ‘I investigated how good the advice was during the times in those years when the markets stagnated. The same pattern was revealed.’

Curriculum vitae

Marc Kramer (Amsterdam, 1970) studied Economics at the University of Groningen. He will be awarded his PhD by the Faculty of Economics and Business, where he is a lecturer-researcher. His thesis is entitled ‘Individual Investor Behavior and Financial Advice’. His supervisors were Prof. F.M. Tempelaar and A. Plantinga

Note for the press

Contact: Marc Kramer

Last modified:13 March 2020 01.49 a.m.
View this page in: Nederlands

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