Broker Check

Why Working with a Qualified Financial Advisor is an Imperative

The BIG Problem

There is a growing body of research over the last couple decades that reveals two very important facts:

  1. Most DIY investors do a very poor job meeting their retirement and other financial goals.1
  2. Working with a financial advisor can add 3-5% per year to your returns2 or generate nearly 23% more certainty-equivalent retirement income.3

If this is true, then why in the world do most people not work with an advisor???  The answer likely lies in the misconception about what a financial advisor does, and how they may help you pursue better results than you can on your own.

Why Choose Us?

It's More about Planning Than Investing

Many people are under the false impression that a financial advisor's role is to help you invest your money.  While that is a part of what an advisor can do for you, it's certainly not all or even the most effective thing.  The suitable results were addressed through a planning process typically consisting of an initial, formal financial plan and then an ongoing planning relationship that adjusts and corrects for life events.  Planning accounts for a potential increase in return of 1.5%-3.5% whereas investment management accounts for only around 1.5%.2 Here is what the research shows are the major areas of added value a financial advisor brings to the table ranked in order.  Each study showed slightly different results but here is the general consensus.

Behavioral Coaching

Behavioral Coaching

1.50% - 2.54%2

Tax Planning*

Tax Planning*

0.75% - 1.17%2

Income & Distribution Management

Income & Distribution Management

~0.70%2

Investment Selection

Investment Selection

0.45% - 0.67%2

Asset Allocation*

Asset Allocation*

Up to 0.52%2

A Formal, Written Financial Plan

A Formal, Written Financial Plan

Greater than 0.50%2

Active Portfolio Rebalancing*

Active Portfolio Rebalancing*

0.27% - 0.35%2

Why Choose Us?

Don't Just Take Our Word For It - See the Research for Yourself!

DALBAR

When discussing investor behavior it is helpful to first understand the specific thoughts and actions that lead to poor decision-making.  Investor behavior is not simply buying and selling at the wrong time, it is the psychological traps, triggers and misconceptions that cause investors to act irrationally.  That irrationality leads to buying and selling at the wrong time, which contributes to underperformance (by 3-5% annually over the long term, according to this report).

2023 QAIB Report

Vanguard

Even the company that promotes the "Do It Yourself" approach has concluded that an advisor brings a lot of value to the table.

Recent Vanguard research shows that your advisor not only adds confidence, but also may add about 3 percentage points of value in net portfolio returns over time.

The Added Value of Financial Advisors

Department of Labor

Department of Labor did an economic impact analysis as part of the Pension Protection Act. They sought to quantify how access to financial advice would benefit retirement plan participants.

They found that $124 Billion was being wasted on investment errors and the expected savings from advice that eliminates these errors was 8.10% per investor (at ~10% uptake).

Financial Advice Saves Investors $13B

Russell Investments

The past decade has also seen an evolution in an advisor’s role – from stockbroker to family wealth planner. We believe the value of an advisor has increased as the services they offer have broadened and deepened.
We also believe it’s important for you to understand that value—especially in those moments where you might feel some short-term concern, confusion, or disappointment about your portfolio.

Why Work With a Financial Advisor?
Why Choose Us?

1 Quantitative Analysis of Investor Behavior, DALBAR, ©2023.

2 Putting a value on your value: Quantifying Vanguard Advisor's Alpha®, The Vanguard Group, Inc., ©2019     /     29 C.F.R. 2550 (2011). Regulatory Impact Analysis     /     Your Value is in the Numbers, Russell Investments, ©2023     /     Advice Matters, The Pacific Financial Group, 2020     /     Advice seekers retire with 79% more money, MarketWatch, May 22, 2014     /     Help in Defined Contribution Plans: 2006 through 2012, financial engines® and AON Hewitt, May 2014     /     Capital Sigma: The Advisor Advantage, Envestnet PMC, ©2019

3 Alpha, Beta, and Now...Gamma, David Blanchett, CFA, CFP® and Paul Kaplan, Ph.D., CFA, Morningstar Investment Management, August 28, 2013

*This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.  

*Asset allocation does not ensure a profit or protect against a loss.

*Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss.


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