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Study: investment consultants’ advice basically bunk

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So what’s a billion dollars’ worth of professional investment advice actually worth? Turns out not much, the Financial Times reports Monday.

A new study shows that pension funds and other large investments that rely on advice from investment consultants fare no better than any other funds. The research comes from Oxford University’s Saïd Business School. Read the team’s findings here.
According to the Oxford team, more than $13 trillion of U.S. institutional money rely on investment consultants for advice about which funds to invest in. The researchers found that:

… consultants’ recommendations of funds are driven largely by soft factors, rather than the funds’ past performance, and that their recommendations have a very significant effect on fund flows, but we find no evidence that these recommendations add value to plan sponsors.

What does this mean for individual investors? Our Making Sense team has put together a couple resources on the topic:

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