Why go it alone on this important journey?

If you’ve ever worked with a coach to fine-tune your athletic performance, or gained valuable insight from working with a mentor, you already know the value of good advice. Good advice can save you time, money, and frustration. Most importantly, good advice can prevent you from making terrible mistakes.

What is a relationship with a financial advisor worth? A 2019 study by Vanguard, one of the world’s largest money managers, attempts to measure the value that the advisor relationship contributes to investor outcomes.

Vanguard analyzed three key services that an advisor may provide: portfolio construction, wealth management, and behavioral coaching. It estimated that portfolio construction advice (e.g., asset allocation and asset location) could add up to 1.2% in additional return, while wealth management (e.g., rebalancing, drawdown strategies) may contribute over 1% in additional return.1

The biggest opportunity to add value was in behavioral coaching, which was estimated to be worth about 1.5% in additional return. Financial advisors can use their insight to guide clients away from poor decisions, such as panic selling or accepting excessive risk in a portfolio. Indeed, the greatest value of a financial advisor may be in helping individuals adhere to an agreed-upon financial and investment strategy.1

Vanguard’s whitepaper concludes that when an investor works with an advisor and receives professional investment advice, they may see a net portfolio return about 3% higher over time.1

How did this study arrive at that conclusion? By comparing self-directed investor accounts to an advisor model, Vanguard found that the potential return relative to the average investor experience was higher for individuals who had financial advisors.1

Of course, the right financial advisor can add additional value not studied by Vanguard, such as helping clients implement wealth protection strategies and coordinating with other financial professionals on tax management and estate planning.

You could argue that a financial advisor’s independence adds qualitative value. It should be noted that not all financial advisors are independent. Some are basically employees of brokerages (so they are accountable to their employer before their clients) and they may be encouraged to promote and recommend certain investments of those brokerages to their clients.2 It’s always wise to ask a potential advisor if they are a fiduciary and how they get compensated to make sure that they align with your goals and objectives. Here’s a list of questions you might want to ask a prospective advisor.

Ultimately, after years of working with a financial advisor, the value of a relationship may be measured in both tangible and intangible ways. Many such investors are grateful they are not “going it alone” on this very important journey.

Citations: 1 – advisors.vanguard.com/iwe/pdf/ISGQVAA.pdf [2/19] 2 – cnbc.com/2019/10/23/guide-to-choosing-the-right-financial-professional-for-you.html [10/23/19]

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results.

After a successful career in high-tech, Sheila McGinn, CFP® followed her passion and became a fee-only Financial Planner, where she helps clients navigate complex financial decisions and reach their financial goals.

Disclaimer: This content is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. For advice specific to your situation, consult a financial planner, accountant, and/or legal counsel. Reproduction of this material is prohibited without written permission from Brightview Financial Solutions, LLC, and all rights are reserved.