Variations in Advisor Portfolio Recommendations

A recent study shows that investors may be receiving variations in investment advice depending upon the advisor who is giving it.

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    Variations in Advisor Portfolio Recommendations

    Variations in Advisor Portfolio Recommendations

    It’s fair to argue that most investment professionals view portfolio recommendations as an objective exercise, based on scientific principles and grounded in modern portfolio theory. This would suggest that portfolio recommendations for similar investor profiles should be substantially similar regardless of the advisor making the recommendation. Alas, this isn’t always the case—there are always variations in investment advice.

    One recent paper, “Variations in Investment Advice Provision: A Study of Financial Advisors of Millionaire Investors,”1 suggests that investors may be receiving very different advice depending upon the advisor giving it.

    A Case Study in Advice

    It is impossible to conduct a real world analysis of how investment advice by advisors may differ given the varied and nuanced nature of individual circumstances. Recognizing this limitation, the authors of “Variations in Investment Advice Provision: A Study of Financial Advisors of Millionaire Investors” conducted a survey of financial advisors (129 responded), providing them with 10 brief hypothetical client profiles (all with at least $1 million in investable assets), asking the advisor to do the following:

    • Recommend one of the seven proffered portfolio recommendation choices
    • Rate the investment knowledge level of the hypothetical client
    • Rank the control each hypothetical client exercises over his or her investments relative to the average investor

    Research Findings

    The research found that, in the main, portfolio recommendations by the respondents were consistent with finance theory (whew!), but there were material variations in portfolio recommendations to the same client profile based on differences in advisor characteristics. Among the research findings:

    • More experienced investment professionals made more aggressive recommendations.
    • Advisors with a wealthier client base selected more aggressive recommendation choices.
    • Investment professionals used to working with less wealthy clients recommended more conservative asset allocations.
    • Older advisors generally recommended less aggressive portfolios.
    • The gender of the advisor did not account for any meaningful difference in recommended portfolios.
    • In nine of the 10 hypothetical client profiles, every one of the seven portfolio choices—ranging from “extremely conservative” to “extremely aggressive”—was recommended by at least one investment professional.

    Differences also surfaced in how advisors judged client experience and their perception of investor control over investments. Women were judged by advisors as having less control over investments and less investment knowledge. However, this did not affect investment professionals’ asset allocation recommendations, with men and women receiving substantially the same asset allocation advice.


    1 Baeckstrom, Ylva and Marsh, Ian William and Silvester, Jo, Variations in Investment Advice Provision: A Study of Financial Advisors of Millionaire Investors (November 11, 2018). Available at SSRN: or

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