Without constraints on their mobility, advisers can move to a competing firm, perhaps taking many of their clients with them and essentially walking out the door with the firm’s assets. If clients trust their advisers more than their advisory firms, then advisers will have considerable power within their firms, since it is their relationships with clients that constitute the firm’s primary asset (Lavetti et al., 2019). In these industries, where asymmetric information abounds and the potential for client harm is large, the ability to foster personal relationships with clients has important implications for employees, firms, clients, and ultimately, the industry’s competitive landscape. Some clients care more about the adviser than the firm, or the surgeon than the hospital, or the lawyer than the law firm. Is it the advisory firm that creates advertisements and develops a brand name that prompts clients to walk into a branch? Or is it the adviser who develops an intimate financial counseling relationship with the client? From the client’s perspective, choosing an adviser or advisory firm is no different from choosing a lawyer or a surgeon. Trust is inherent in these relationships, although the literature has yet to distinguish between whom clients trust (Gennaioli, Shleifer, Vishny, 2015, Gurun, Stoffman, Yonker, 2018, Kostovetsky, 2016). The relationships between these advisers-numbering over 760,000 in our data-and their millions of clients are critical for supporting the economic activity generated by these investments. Financial advisers in the United States manage $28 trillion of assets for their clients.
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