Impact of the Financial Advisor on Clients’ Financial Outcomes: An Integrative Model

Abstract

A financial advisor may either act as a consultant or may be delegated the entire financial advising process. In both cases, researchers tend to conclude that advisors have an impact on their clients’ financial outcomes. However, there is no agreement on the nature and extent of this impact. We argue that such discordance in the results being reported in prior research arises from the different theoretical lens used to observe the phenomenon: agency theory, trust theory, and the concept of knowledge. In our view, the complexity of advisors’ contribution to their clients’ outcomes requires a novel approach that extends beyond a single theory. Relying upon a literature review, we propose an integrative multi-theory model that reconciles prior findings and illustrates how financial advisers impact clients’ outcomes at each step within the financial advising process. Practice-grounded, the model also provides a causal mechanism clarifying the opaque and complex services provided by the financial advisor.