Do academic investment insights benefit society?

• Academic evidence underlines the need for well diversified portfolios delivering low cost exposure to risk factors, and major challenges with active management.
• There is evidence that the investment industry ignores the insights from academic evidence and is preoccupied with charging high fees while adding little value to investors.
• Evidence suggests that the industry successfully hides disappointing results and puts on a favourable appearance through advertising and marketing, as well as manipulations including window dressing, juicing and benchmark changes.
• We discuss how researchers can contribute to improve the situation in general and outline specific implications for future research.

Sound investment decisions are crucial for retirement savings and the financing of education. The impact of investment mistakes on the general welfare in society can be tremendous. This paper reviews the implications of finance research for sound investment decision making and contrasts these with the evidence on actual investment practice which is infused with conflicts of interest and may damage investor welfare by promoting returns chasing, hiding bad performance and overcharging for services. The objective of this paper is to assess the current impact that academic research findings have on investment practice and social welfare, and discuss how researchers can contribute to improve the situation.