Kelley School of Business
1309 E. 10th Street
Bloomington, IN 47405
NBER Program Affiliations:
NBER Affiliation: Faculty Research Fellow
NBER Working Papers and Publications
|November 2014||Retail Financial Advice: Does One Size Fit All?|
with Stephen Foerster, Juhani T. Linnainmaa, Brian T. Melzer: w20712
Using unique data on Canadian households, we assess the impact of financial advisors on their clients' portfolios. We find that advisors induce their clients to take more risk, thereby raising expected returns. On the other hand, we find limited evidence of customization: advisors direct clients into similar portfolios independent of their clients' risk preferences and stage in the life cycle. An advisor's own portfolio is a good predictor of the client's portfolio even after controlling for the client's characteristics. This one-size-fits-all advice does not come cheap. The average client pays more than 2.7% each year in fees and thus gives up all of the equity premium gained through increased risk-taking.
Published: STEPHEN FOERSTER & JUHANI T. LINNAINMAA & BRIAN T. MELZER & ALESSANDRO PREVITERO, 2017. "Retail Financial Advice: Does One Size Fit All?," The Journal of Finance, vol 72(4), pages 1441-1482.