Title: 'One size fits all' in private banking: implications for the wealth and asset management industry

Authors: Enrica Bolognesi; Enrico Maria Cervellati; Luca Grassetti; Roberto Tasca

Addresses: Department of Economics and Statistics, University of Udine, Via Tomadini 30, Udine, Italy ' Department of Human Resources, Link Campus University, Via Casale di San Pio V 44, Roma, Italy ' Department of Economics and Statistics, University of Udine, Via Tomadini 30, Udine, Italy ' Department of Management, University of Bologna, Via Capo di Lucca 34, Bologna, Italy

Abstract: We focus on discretionary portfolio management to examine the impact of advisory on strategic asset allocation and its dynamics. We use a unique and proprietary dataset from a large European private bank of 5,627 clients that covers the period from 2005 to 2013. While high-net-worth clients opt for customised advisory, we show instead that allocations are quite similar across a range of clients; advisors are conservative and favour low-risk profiles regardless of clients' age. We observe a low number of active clients and provide evidence of the low extra returns generated by changes in the portfolio asset allocation. Finally, we highlight that changes in risk attitude mainly depend on portfolios' past performance and/or past market performance, suggesting that advisors are not effective in mitigating extrapolation bias and self-attribution bias. Overall, we provide evidence of the low level of tailoring, suggesting a 'one size fits all' approach in private banking.

Keywords: asset and wealth management; advisory; behavioural biases; linear mixed model analysis; private banking; portfolio customisation.

DOI: 10.1504/IJMFA.2024.137626

International Journal of Managerial and Financial Accounting, 2024 Vol.16 No.2, pp.196 - 228

Received: 29 Jul 2022
Accepted: 30 Dec 2022
Published online: 02 Apr 2024 *