Wealth Meets Value: The Role of Advice for High Net Worth Individuals

ABSTRACT While financial advice in retail banking frequently fails to generate net‐of‐cost value due to agency conflicts, evidence from the high‐net‐worth segment remains scarce. This paper examines advice effectiveness within a private banking environment characterized by dedicated advisor relationships with two asset‐based compensation models, one of which is a hybrid model combining a lower flat fee with per‐trade charges. Utilizing a proprietary panel dataset of 969 high‐net‐worth portfolios, we deploy a two‐way fixed effects framework alongside robust matching diagnostics to mitigate selection on observables, as well as time‐invariant unobservables. Results from our base specification indicate that higher advice intensity significantly expands Sharpe Ratios. Throughout all robustness tests, we document evidence of a systematic reduction in idiosyncratic concentration risk and a mitigation of geographic home bias in our base sample. Advisors' contributions operate at the within‐investor level via a pronounced buy–sell asymmetry that aligns with advisor incentives to preserve the internal asset base. Subsample analyses reveal that advice acts as an allocation enabler for financially literate investors, as a volatility filter for frequent traders, and as a buffer against panic‐driven over‐trading during macroeconomic shocks.