13
These individuals are similar to those with their PPS wealth in the
default fund, e.g., in terms of education level.
The results show that there is, on average, a higher excess return from
an external financial advisor for those that have decided to acquire
these services. However, the extra excess return is on average small,
net of the financial advisor’s charge. The results also indicate that the
financial advisors significantly reduce the portfolio risk, which should
be considered as positive for the individual.
Furthermore, the analysis indicates that the positive effect of external
financial advisors is explained by the fact that they are more active
and change funds more frequently for their client than the average
PPS saver. Individuals who are as active themselves are slightly
better on average at generating excess return.
Finally, the analysis shows that individuals who choose to hire an
external financial advisor for their PPS wealth are those who can be
expected to be relatively inactive in the PPS. Thus, it may be
profitable for them to engage an external financial advisor. The
implication of this is that financial advisors have generated a higher
excess return for their clients than they themselves would have
achieved on average had they not chosen this service. Note that the
effect of financial advisors is only examined for the group that
actually decided on a financial advisor and that the results cannot be
generalized to pension savers in general.
Discussion
In December 2011, the ability to mass-change funds was abolished.
Therefore the possibility of discretionary fund management of this
type in the PPS has been eliminated. The results in this report indicate
that this is likely to disadvantage somewhat the group that chose
external advisors, since the stopping of coordinated mass changes in
practice led to a substantial reduction in the ability to outsource
recurring fund-choice decisions to financial advisors.
This must be related to the external effects of coordinated mass
changes on other pension savers in the PPS, as noted in previous
studies. These studies have shown that the mass changes had negative
external effects on other retirement savers (both active and passive) in
the form of increased transaction costs and fund value fluctuations,
and on the Swedish Pensions Agency in the form of an increased
