Comprehensive Advisors vs. Modular Advisors: A Study of Household Financial Assets During the Great Recession

Abstract

This study intends to investigate the extent and dynamics of financial advisory services, and their relationship to changes in the different financial assets held by households’ in the United States, before and after the Great Recession, using the 2007-2009 panel of Survey of Consumer Finances (2009). The panel survey was conducted in two waves among the same households, before the Great Recession in 2007-08, and after the recovery started in 2009-10. The study found that the rejection of comprehensive advisers after the recession was associated with a significant reduction in total financial assets. Retention of comprehensive advisors was associated with a significant increase in mutual funds, but also increase in bonds. Retention of modular advisors was associated with a significant decrease in IRA/Thrift account values and increase in bonds. Obtaining new modular advisors after the recession led to lower liquid assets, and higher bonds in a recovering market. Rejection of modular advisors also led to higher bonds. The study also presents the implications for financial planners.

Keywords: Financial planners, CFP®, Great Recession, Financial Behavior