‘Financial Advisors and Retirees’ Risk-Taking

Abstract

Defined contribution (DC) plans have effectively replaced defined benefit plans as the primary source of retirement savings for workers in North America. In DC plans, retirees must solve a challenging optimization problem to make their retirement wealth last. Financial advisors could help. Do they? We study financial advisors' impact on both the asset allocation and withdrawal behavior of retirees in Canada. We present new stylized facts about withdrawals and asset allocations in advised retiree accounts, documenting significant heterogeneity in withdrawal rates and high risky share well into retirees' 80s. We also show that advisors affect how retirees respond to volatility in financial markets.