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Agency Theory and Financial Planning Practice
Author(s) -
Kingston Geoffrey,
Weng Haijie
Publication year - 2014
Publication title -
australian economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.308
H-Index - 29
eISSN - 1467-8462
pISSN - 0004-9018
DOI - 10.1111/1467-8462.12053
Subject(s) - agency (philosophy) , finance , business , asset (computer security) , asset management , principal–agent problem , actuarial science , sociology , social science , corporate governance , computer security , computer science
We extend an influential contribution to the literature on agency theory and then use this extension, along with other theoretical contributions, to shed light on agency problems affecting funds management and financial planning in Australia. The case for pure fee‐for‐service in actively managed funds and plans turns out to be weak. The amount of money exposed to risk by an active manager should be less than the entire investible wealth of the client, especially in the case of investors on the cusp of retirement. Asset‐based fees on actively managed funds should include a fulcrum component .