Occupational Income Betas for Financial Advisers

Grable, John E.; McGill, Samantha
June 2009
Journal of Financial Planning;Jun2009, Vol. 22 Issue 6, p50
Academic Journal
•Previous research has shown that a person's occupational income variability affects the level of risk aversion within a portfolio.Typically, it is assumed that those with high income variability ought to favor fixed-income assets over equities. This paper hypothesizes that a person's income variability is occupation-specific and that an occupational income beta, using a best fit index can be developed for any occupation. •Occupational income betas, the outcome from this study, can be used by financial advisers as an asset allocation tool when developing and rebalancing client portfolios. •This paper establishes beta coefficients for a variety of occupations relative to stocks, bonds, and T-bills. It finds that betas for most occupations relative to T-bills are both positive and large, betas for most occupations relative to stocks are generally low and variable, and betas for most occupations relative to bonds are predominantly significant and positive. •It is shown that the best fit for most occupations is not equities but fixed- income indexes. Of particular interest is the finding showing occupational income, in the majority of cases examined, being most closely associated with the Treasury bill market. •The paper establishes goodness of fit to determine the amount of explained variance using r², finding, in most cases, that variations in occupational incomes could only be somewhat explained, and that, in most cases, the explained variance was low. •The paper concludes with a summary of how financial advisers can calculate occupational income betas and how each beta can be assessed and used when working with clients.


Related Articles

  • Old Mutual's Ventre: The benefits of risk-rating. Vendre, John // Fundweb;11/29/2012, p9 

    The article discusses a perspective on the benefits of risk-rating among financial advisors. It focuses on client outcomes as key aspect of establishing comfort zones with clients, particularly on determining their capacity for losses. Opting to risk-targeted funds have been described a way of...

  • Look inside the box for manager research. Owen, John // Money Management;6/26/2008, Vol. 22 Issue 23, p26 

    The article discusses the considerations that must be addressed by multi-manager providers in conducting management research for their clients in Australia. An in-house research team could carry out their research effectively without distraction from multiple clients with competing needs and...

  • The Future of CPAs In Financial Planning. Desmarais, David M. // CPA Wealth Provider;Oct2008, p27 

    The article discusses the future of the certified public accountants (CPAs) in financial planning. It cites several opportunities if the CPA throughout the year, which include the year-end tax planning, reviewing trust and estate documents, and tax compliance during the busy season. It contends...

  • WHY STOCK INVESTORS FREAK OUT. FINKE, MICHAEL // Research;Aug2013, Vol. 36 Issue 8, p32 

    The article presents a research revealing factors that create panic among clients during market downturns in the U.S. and further focuses on how investment advisors can limit the portfolio damage of clients. The research examines concepts such as investment risk, volatility, and loss aversion....

  • Back to old times? Loria, Keith // Westchester County Business Journal;9/5/2005, Vol. 44 Issue 36, p25 

    The article focuses on the possible increase in the number of financial advisers in the U.S. This increase will be due to the increasing demand for services of financial advisers in managing money. Today, more financial advisers use fee-based approach. They can also exploit the market when it is...

  • Between a Rock and a Hard Place...  // Journal of Financial Planning;Aug1998, Vol. 11 Issue 4, p13 

    The article deals with the difficulties facing financial planners. Planners--at least responsible ones--preach restraint to their clients. A USA Today article in May 1998 tried mightily to convey what a tough sale restraint is these days. It quoted several planners who admitted some clients are...

  • Reader Spotcheck.  // Journal of Financial Planning;Apr2000, Vol. 13 Issue 4, p33 

    This article presents the result of the survey conducted by the periodical on various financial planning issues in the U.S. A statistics reveal that majority of financial planning practitioners failed to take formal steps to determine the value of their practice. Majority of consumers believe...

  • Getting a Grip. Jahnke, William // Journal of Financial Planning;Apr2002, Vol. 15 Issue 4, p28 

    This article focuses on issues related to the asset allocation process in the U.S. There is a growing chorus of academics, consultants and investment advisors who are lowering long-term stock market return expectations and calling for a reappraisal of savings goals and asset allocation...

  • Comfortable Charging for 'Wisdom' Vaccai-Yess, Robin // Journal of Financial Planning;Dec2003, Vol. 16 Issue 12, p19 

    The article argues that hourly fees should be imposed by financial planners. Clients pay for the time and expertise of planners so planners need not market the idea of asset management. Clients understand the method of compensation and a retainer for asset management services can and does work...


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics