Does financial advisors improve portfolio efficiency for individual investors? Evidence from large-scale microdata

Financial advisors hold a central position within the capital market, yet their contribution to portfolio efficiency remains uncertain. From a perspective rooted in the context of developing countries, this paper delves into the influence of financial advisors on portfolio efficiency by using a unique dataset to calculate the Sharpe ratio for each household. The empirical findings suggest that household could significantly improve their portfolio efficiency with the assistance of financial advisors in China, particularly among older and less financially literate households. The role of financial advisors is achieved through three channels: enhancing attention to economic and financial information, augmenting awareness of investment products, and mitigating extreme portfolio risks.