Analysis reveals positive performance increases investors' likelihood to seek further advice from brokers, implying advisor effectiveness plays a crucial role.
Does the performance of advisors’ recommendations influence investors’ propensity to seek advice again? I investigate a sample of calls between 10,063 German brokerage clients and financial advisors from 2005–2015. If advisors’ recommendations in the initial meeting led to positive (vs. negative) performance, investors are 2.1 times more likely to arrange a second meeting. This effect is driven by the performance of the recommendations the investor decided to follow. Investors with positive performance follow recommendations to a greater degree. The findings show that experiences matter in the advisory context and shape the demand for advice. (JEL D14; G11; G40; G51)
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Charline Uhr (2025) studied this question.
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