NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Alessandro Previtero

Kelley School of Business
Indiana University
1309 E. 10th Street
Bloomington, IN 47405

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NBER Program Affiliations: AG
NBER Affiliation: Faculty Research Fellow

NBER Working Papers and Publications

November 2014Retail 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.
 
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