VGSF - WU Vienna - LC

Mark Egan, Harvard Business School

online via Microsoft Teams Live Events 17:30 - 18:45

Organizer VGSF

As part of the ser­ies of the "Fin­ance Re­search Sem­inar", VGSF wel­comes Mark Egan from Har­vard Busi­ness School to present his re­search pa­per.
Per­sonal Webpage

Pa­per

Con­flict­ing In­terests and the Ef­fect of Fi­du­ciary Duty — Evid­ence from Vari­able An­nu­it­ies

We ex­am­ine the mar­ket for vari­able an­nu­it­ies, a pop­ular re­tire­ment pro­duct with over $2.2 tril­lion in as­sets. In­surers pay brokers com­mis­sions for selling an­nu­it­ies, and brokers typ­ic­ally earn higher com­mis­sions for selling more ex­pens­ive an­nu­it­ies. Our res­ults in­dic­ate that sales are five times more sens­it­ive to brokers’ fin­an­cial in­terests than in­vestors’. To limit con­flicts of in­terest, the De­part­ment of Labor pro­posed a rule in 2016 hold­ing brokers to a fi­du­ciary stand­ard. We find that after the pro­posal, sales of high-­ex­pense products fell by 52% as sales be­came more sens­it­ive to ex­penses. Based on our struc­tural es­tim­ates, in­vestor wel­fare im­proved over­all.



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