Followers of the pied piper of pensioners

Abstract

Using survey and administrative data, we study followers of H&L, a massively popular Chilean pension advisor, establishing that financial literacy is not a panacea for poor retirement decision-making. We detail the dynamics of who followed H&L and why. H&L differentially drew financially sophisticated investors, and exposure to H&L causally increased financial sophistication. Nonetheless, followers earned mean annual returns below all buy-and-hold strategies and were aware of this underperformance. Moreover, performance did not materially affect renewal rates. Most followers renew, citing high returns, loss minimization and trust as reasons for following. We show followers gained information about financial matters that had clear, tangible value, and they acted on this information. We posit that followers attributed this to H&L's skill, thus continuing to follow despite the underperformance.