Financial Advisors and Retirees' Risk-taking

Allison Cole, Maarten Meeuwis, Alessandro Previtero and Noah Stoffman

No 35990, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Advised retirees keep about two-thirds of their portfolios in equities well into old age—30 to 40 percentage points more than non-advised retirees, target-date funds, or common rules of thumb. These allocations reflect active choices rather than inertia, and they adjust gradually toward a new advisor’s investment style following advisor switches. Equity shares rise with relationship tenure, and advisor influence is strongest among clients with low financial knowledge or risk tolerance, consistent with trust facilitating risk-taking. Given retirees’ modest financial wealth relative to their safe pension income, we rationalize these portfolios in a standard life-cycle model with moderate risk aversion. Modeling advisors as “money doctors” who correct clients’ pessimistic beliefs about the equity premium, we find that, relative to a no-advice counterfactual, the welfare gains from higher risk-taking are of the same order of magnitude as the cost of advice.

JEL-codes: D15 G11 G24 G51 J26 (search for similar items in EconPapers)
Date: 2026-11
Note: AG
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