Financial advice and household financial portfolios

We investigate the role of financial advice in shaping the composition of UK household portfolios. Our findings suggest that advice is associated with a reallocation of wealth away from real estate and towards bonds and stocks. Among the various reasons why households seek financial advice, "advice for investments" consistently has the largest effect, especially on the portfolio shares held in stocks (positively) and in real estate (negatively). With respect to the type of financial advisor, having a consultation with a stockbroker has a particularly large effect on the portfolio share in stocks. In addition, even free financial advice has a positive effect on the portfolio shares in bonds and stocks compared to not receiving advice. Finally, we explore the relationship between portfolio shares and risk, whilst accounting for the effects of financial advice. We find a positive association between the portfolio shares in bonds and stocks and the portfolio risk.