Risk tolerance and asset allocation for investors nearing retirement

Hariharan, Govind; Chapman, Kenneth S.; Domian, Dale L.

doi:10.1016/s1057-0810(00)00063-9

Cited by 104 publications

(84 citation statements)

References 19 publications

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“…This positive association is in accordance with prior research (e.g., Hariharan et al 2000;Cardak & Wilkins 2009) and was also confirmed in the sensitivity analysis. Furthermore, risk tolerance was found to intervene in the relationship between financial literacy and decision-making, suggesting that less financially literate clients who tend to be less risk tolerant are more likely to allocate their funds into less risky assets.…”

Section: Discussionsupporting

confidence: 92%

“…Notably, it has been reported that risk tolerant individuals tend to invest less in risk free assets (Hariharan et al 2000) or risk averse households are more likely to have a lower proportion of their assets allocated in risky assets (Cardak & Wilkins 2009). Consistent with these studies, it is logical to expect (H7) that risk tolerant clients tend to invest in riskier products compared to less risk tolerant ones.…”

Section: Financial Risk Tolerance and Investment Decision-making (H7)mentioning

confidence: 76%

“…Extending the literature, the study included client trust in the financial advice service, relationship length with the service, and client financial literacy as risk tolerance determinants in its framework. Financial risk tolerance was then posited to have a positive relationship with client investment decision (asset allocation) as more risk tolerant investors tend to invest more in risky assets (Hariharan et al 2000;Cardak & Wilkins 2009). …”

Section: Discussionmentioning

confidence: 99%

“…Risk tolerance has been found to significantly affect risky decision-making in different financial/investment contexts (e.g., Yuh & DeVaney 1996;Hariharan et al 2000;Cardak & Wilkins 2009). Notably, it has been reported that risk tolerant individuals tend to invest less in risk free assets (Hariharan et al 2000) or risk averse households are more likely to have a lower proportion of their assets allocated in risky assets (Cardak & Wilkins 2009).…”

Section: Financial Risk Tolerance and Investment Decision-making (H7)mentioning

confidence: 99%

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The Influence of Financial Risk Tolerance on Investment Decision-Making in a Financial Advice Context

Nguyen¹,

Gallery²,

Newton³

2016

AABFJ

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Client risk tolerance is universally assessed in the advisory process to help financial advisers provide suitable advice that assists clients in their investment decision-making. Although there is a well-established literature on risk tolerance and decision-making, little is known about financial risk tolerance and its influence on investor decisions in the financial advice context. Thus, the purpose of this study is to examine this influence with a focus on the key expected risk tolerance determinants: client financial literacy, trust in the financial advice service, and relationship length with the service. A new theoretical model and related hypotheses were proposed and tested using survey data from financial adviser clients in Australia (N=538). Results revealed a positive relationship between client risk tolerance and investment decision-making. Further, client trust and relationship length with the service were found to be positively associated with client financial literacy and risk tolerance. These findings, which provide a more comprehensive understanding of how risk tolerance and its antecedents influence client decisions, have the potential to improve advice in the financial services industry. KeywordsRisk tolerance, individual investment decisions, client-adviser relationship, financial advice context, financial planning AbstractClient risk tolerance is universally assessed in the advisory process to help financial advisers provide suitable advice that assists clients in their investment decision-making. Although there is a well-established literature on risk tolerance and decision-making, little is known about financial risk tolerance and its influence on investor decisions in the financial advice context. Thus, the purpose of this study is to examine this influence with a focus on the key expected risk tolerance determinants: client financial literacy, trust in the financial advice service, and relationship length with the service. A new theoretical model and related hypotheses were proposed and tested using survey data from financial adviser clients in Australia (N=538). Results revealed a positive relationship between client risk tolerance and investment decisionmaking. Further, client trust and relationship length with the service were found to be positively associated with client financial literacy and risk tolerance. These findings, which provide a more comprehensive understanding of how risk tolerance and its antecedents influence client decisions, have the potential to improve advice in the financial services industry. JEL Classification: D14

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Section: Discussionsupporting

confidence: 92%

Section: Financial Risk Tolerance and Investment Decision-making (H7)mentioning

confidence: 76%

Section: Discussionmentioning

confidence: 99%

Section: Financial Risk Tolerance and Investment Decision-making (H7)mentioning

confidence: 99%

See 2 more Smart Citations

The Influence of Financial Risk Tolerance on Investment Decision-Making in a Financial Advice Context

Nguyen¹,

Gallery²,

Newton³

2016

AABFJ

View full text Add to dashboard Cite

show abstract

“…For instance, it is seen that individuals with high levels of financial risk tolerance prefer stocks rather than bonds and certificates of deposit in their retirement funds (Hariharan et al, 2000). Van Rooij et al (2007) investigated risk attitudes towards general matters, financial matters and pension matters and found that for the decisions regarding the pension, individuals acted in the most risk-averse manner choosing the most conservative portfolios of funds.…”

Section: Financial Risk Tolerancementioning

confidence: 99%