Do advisors respond to investors’ preferences?

To understand if investment advisors are responsive to private investors’ preferences, we send trained mystery shoppers to 414 investment consultations. Our findings show that investment advisors generally recommend products that match investors’ risk preferences but only show limited consideration of investors’ sustainability preferences even when preferences are explicitly signalled. We find a positive advisor attitude towards sustainable investments to be associated with a higher percentage of suitable product recommendations while a high reliance on a product portfolio from a single asset manager decreases the percentage of suitable product recommendations. Sustainability preferences that limit advisors’ ability to make an offer are altered in legal preference documentation. Investment advisors working for banks that primarily sell products from a single asset manager are more likely to wrongly document investors’ sustainability preferences. Inaccurate documentation persists even if advisors are monitored. These findings have important implications for regulators and investors. First, regulators should be aware that merely requiring investment advisors to query and document an investor’s sustainability preference does not guarantee that preferences are considered in product recommendations. Second, investors with sustainability preferences should carefully consider whether the products recommended by investment advisors really fit their sustainability preferences before investing.