Study Finds Advised Retirees Keep Nearly Two-Thirds of Portfolios in Stocks, Far Outpacing Unadvised Peers

New research examining how retirees invest finds a striking gap between households who work with financial advisors and those who do not: retirees receiving professional advice hold roughly two-thirds of their portfolios in stocks even at advanced ages. That equity exposure is dramatically higher—by about 30 to 40 percentage points—than the stock allocations observed among unadvised retirees, investors using target-date funds, or the allocations implied by widely cited retirement “rules of thumb.”

The pattern does not appear to be a passive byproduct of neglect or default settings. Instead, the evidence points to deliberate decision-making shaped by the advisor-client relationship. When retirees change advisors, their portfolios do not remain fixed; rather, stock allocations drift over time toward the investment style of the new advisor. Equity exposure also tends to increase with the length of the relationship, suggesting that influence accumulates as trust and familiarity develop.

The advisor effect is not uniform across clients. The strongest shifts toward higher equity shares show up among retirees with lower financial knowledge or lower stated risk tolerance. The researchers interpret this as consistent with a trust channel: investors who feel less confident or more cautious may rely more heavily on an advisor’s guidance, making them more willing to accept investment risk than they otherwise would.

At first glance, holding so much in equities late in life can look aggressive. The study argues that for many retirees, this behavior may be economically defensible once their broader balance sheet is considered. Retirees often have relatively limited financial wealth compared with the “safe” income stream provided by pensions. That stable income can function like a bond in the background, potentially allowing households to take more risk with the portion of wealth invested in markets.

To evaluate whether advisors’ encouragement of risk-taking improves outcomes, the authors turn to a standard life-cycle model and assume moderate risk aversion. They introduce advisors as “money doctors”—professionals who help clients correct overly pessimistic beliefs about the expected reward for holding stocks (the equity premium). In this framework, advice moves retirees closer to an equity allocation that better matches long-run expected returns, compared with a scenario in which they invest without guidance.

The model-based results suggest the benefits are material. Relative to a no-advice counterfactual, the welfare gains from the additional risk-taking induced by advisors are estimated to be on the same order of magnitude as the fees retirees pay for advice. In other words, the study concludes that the value retirees receive from better-calibrated portfolio risk can be comparable to what the service costs—at least under the assumptions that advisors primarily improve beliefs about stock returns and that clients exhibit moderate aversion to risk.

The work was conducted by Allison T. Cole, Maarten Meeuwis, Alessandro Previtero, and Noah Stoffman, and appears as research disseminated through the National Bureau of Economic Research.

Why it matters

Retirees’ equity exposure is a central determinant of how securely they can fund spending throughout retirement—and how vulnerable they are to market downturns. This research suggests advisors can meaningfully change portfolio risk, particularly for less financially sophisticated clients, raising questions about when that influence is helpful versus excessive. The key issue to watch is whether higher stock allocations remain appropriate across different retirees’ circumstances, especially as markets and fee structures evolve.