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Asset allocation in private wealth management: Theory versus practice♦ David Schröder Birkbeck College, University of London Department of Economics, Mathematics and Statistics Malet Street, London WC1E 7HX, United Kingdom Tel: +44 (0)207 631 6408 d.schroeder@bbk.ac.uk Abstract This study analyzes the responses to a representative survey of wealth advisors on private wealth management practices, and compares the advisors’ views to academic research in household finance. This study demonstrates that many wealth managers do not apply novel insights proposed by financial economists when advising their clients. Many practitioners focus on managing only the market risk exposure of their clients’ portfolios. Although financial research has stressed the importance of incorporating human capital, planned future expenditures and the investment time horizon into the investor’s asset allocation, these aspects are neglected by most practitioners. JEL Classification: D14, G11, G23 Keywords: private banking, household finance, private wealth management, survey, portfolio choice, asset allocation ♦ I am grateful to Noël Amenc, Sergio Focardi, Felix Goltz, and Lin Tang for helpful discussion and comments. I would like to thank the EDHEC-RISK Institute for sharing the data. Any remaining errors are mine. 1 1. Introduction