Conflicts of Interest in Mutual Fund Sales: What Do the Data Tell Us?
Conflicts of interest can arise when financial advisors and brokers have a financial incentive to recommend certain products to investors. However, identifying the effects and quantifying the costs of conflicted advice has been a challenge for researchers and regulators alike. In this paper, we examine data from the SEC and Morningstar to quantify how payments to brokers drive fund flows and affect investor returns, and to determine the extent to which regulation has been effective in mitigating conflicts of interest.