1. Regulating Commission-Based Financial Advice: Evidence from a Natural Experiment.
- Author
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Sokolinski, Stanislav
- Subjects
SALES commissions ,FINANCIAL planners ,ADVICE ,PRICE cutting ,INVESTMENTS ,ISRAELI politics & government, 1993- ,INVESTORS ,MUTUAL funds - Abstract
Do limitations on commissions paid to financial advisers reduce prices of financial products and stimulate investment? I examine these questions by estimating the causal effects of regulating commissions for mutual fund distribution. I exploit the unique institutional setting in Israel and the 2013 policy change when the government reduced commissions differently for different fund types. The reform led to a major decline in fund expense ratios and a consequent increase in fund flows. Funds with price-sensitive investors experienced 35% larger inflows. I interpret these results as investor responses to price competition fostered by a reduction in distribution costs. [ABSTRACT FROM AUTHOR]
- Published
- 2023
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