Practical Applications of Do as I Say, Not as I Do: An Analysis of Portfolio Development Recommendations Made by Financial Advisors

Practical Applications Summary

In Do as I Say, Not as I Do: An Analysis of Portfolio Development Recommendations Made by Financial Advisors, from the Spring 2020 issue of The Journal of Wealth Management, authors John Grable (of the University of Georgia), Amy Hubble (of Radix Financial), and Michelle Kruger (of Loras College) explore the variation of financial advisors’ asset allocations, from general best practices to hypothetical scenarios. While they find advisors’ general allocation strategies align with their scenario-specific allocations in most regards, they also discover that, in practice, advisors tend to subconsciously overweight their clients’ age and employment status. This overweighting leads to suboptimal allocation portfolios with lower risk and a higher ratio of bonds to equities.

TOPICS: Portfolio construction, risk management, wealth management