NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Stephen Foerster

Ivey Business School Western University
1255 Western Road
London, Ontario, Canada N6G 0N1

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: Western University

NBER Working Papers and Publications

November 2014Retail Financial Advice: Does One Size Fit All?
with Juhani T. Linnainmaa, Brian T. Melzer, Alessandro Previtero: 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. citation courtesy of

 
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