Steven. I agree that loss aversion is a major reason why savers of all ages put less in equities than they should and that it is more acute in older people for the reasons you mentioned.For a lot of people, loss aversion is a bigger driver and minimising their losses is more important than maximising the gains
It is a major hurdle to be overcome by anyone advising people where to put their money. It is especially intractable because loss aversion is hard-wired into us by evolution. (He who fights and runs away will live to fight another day - and to procreate). Unfortunately, some advisers are even more risk-averse than their clients and exacerbate the problem. From what I hear, you're not one of them. Fear of loss on the part of the adviser is perfectly understandable. If I were an adviser, I would be terrified that the client could lose money in the first month. There is close to a 50:50 chance that they will, irrespective of where markets are at the time I'm advising them. That could make me look stupid. Daniel Kahneman, who won a Nobel Prize for his work in behavioural economics, recognised this when he wrote that ".. decision makers who expect to have their decisions scrutinised with hindsight are driven .. to extreme reluctance to take risks.”
My proposals for smoothing returns over many years for Group ARF's and auto-enrolment were partly designed to address the problem of loss aversion.