Many older retirement investors are more cautious about stocks than they need to be; however, a new study finds that financial advisors often recommend higher equity allocations — advice that could actually help households achieve better long-term outcomes.

In What Stock Allocations Do Advisors Suggest and Does It Impact Clients? (Issue in Brief 25-19, 2025), Jean-Pierre Aubry and Yimeng Yin of the Center for Retirement Research at Boston College analyze how advisors guide individual investors on portfolio mix. To focus on those most reliant on personal savings, the survey deliberately under-sampled individuals with defined benefit pensions. (Read the brief)

Key findings:

• Older retirement investors tend to be too pessimistic about stocks.
• Advisors play an important role in shaping allocation decisions.
• For investors with average risk tolerance, advisors usually recommend more equities than investors say they want.
• That advice is often beneficial because it reflects a more accurate view of long-term risks and returns.

Supporting details:

• Surveys of ~400 advisors and ~1,000 investors ages 48–78 (with $100,000+ in assets) found that advisors generally tilt portfolios toward equities, especially when risk tolerance is “average.”
• For a typical 65-year-old retired couple with moderate risk tolerance, the average recommended stock allocation was about 48%. For low-risk investors, it dropped closer to 30%.
• Many investors follow their advisors’ guidance more closely than their initial comfort levels. Among those who said advice changed their outlook, 60% became more risk-tolerant.
• Advisor guidance tends to track target-date fund “glide paths” such as the Morningstar Lifetime Allocation Index.

What Drives Advisors’ Recommendations?

The CRR brief also explored what shapes advisor decisions, using three scenarios: a 65-year-old retired couple with moderate risk tolerance, the same couple with low risk tolerance, and the same couple with more guaranteed lifetime income.

Regression analysis pointed to several drivers:

• Return assumptions: Advisors expecting a higher stock-bond return gap leaned more heavily into equities.
• Risk perception: Advisors who viewed stocks as especially risky recommended lower allocations.
• Compensation: Those earning a larger share from asset-based fees tended to suggest more stocks.
• Advisor type: Registered Investment Advisors (RIAs) showed weaker links between fee structure and advice than broker-dealers.
• Income strategies: Approaches such as “flooring” with Social Security, pensions, and annuities produced more conservative allocations than “bucket” or “total return” methods.

Why It Matters for TEXPERS

• Context for members: While Texas public pension systems manage retirement collectively, many members also invest personally. Understanding retail behavior helps trustees anticipate member questions and perspectives.
• Risk communication: The study shows that individuals often want less equity exposure than advisors recommend. Public pensions face a similar challenge — explaining why equities are essential to meeting long-term obligations.
• Education opportunity: This research underscores the importance of showing members how DB plans reduce individual risk, offering a stable foundation compared with self-directed accounts.
• Trustee perspective: By examining how individuals invest without a DB plan, trustees can better appreciate the safety net public employee retirement systems provide compared with the risks households face on their own.

 About the Author: Allen Jones is the director of communications and event marketing for TEXPERS. He joined the Association in 2017. Before TEXPERS, he worked in the news media industry, producing content for newspapers, magazines, and online publications and leading newsrooms as an editor and publications manager. [email protected]    

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Editor’s Note: This article was prepared with the assistance of artificial intelligence tools to support research, fact-checking, and formatting. Final content decisions, including writing, editing, and publication, were completed by TEXPERS staff.