Compensation of Investment Advisors

with Stephan Shipe, The Journal of Investing, Volume 27(1), 2018, 80-86, doi: 10.3905/joi.2018.27.1.080

Abstract

The use of an investment advisor presents an agency problem as the firm works in the client’s interest while also managing its own growth. We use a dataset of over 30,000 advisor-year observations to investigate the potential for agency problems in the analysis of investment advisor firm characteristics. The compensation structures of investment advisors are not homogenous, varying by services offered. In addition, firm size is a large factor in determining the number of clients an advisory employee services. This analysis sets the foundation to understanding the compensation component of the investment advisor relationship and the associated agency problem.

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