Preventing Emotional Investing : An Added Value of an Investment Advisor

We analyze a unique, comprehensive, multi-decade dataset of all communications with clients by a boutique investment advisory and investment management firm to explore the behavior of individuals involved in financial decision making. We propose and test a theory of self-regulation to explain both the appeal and the value of investment managers to individual investors, and we find that all of the predictions of the theory are borne out by the data. In short, our unique dataset allows us to provide evidence that an important service provided by investment advisors, and apparently desired by individual investors, is the barrier the advisor provides to prevent the individual from aggressively trading and thereby losing money