Measuring the Value of a Financial Professional

What is a relationship with a financial professional worth to an investor? A 2019 study by Vanguard, one of the world’s largest money managers, attempted to answer that question.

  

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

 

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

 

Vanguard analyzed three key services that a professional may provide: portfolio construction, wealth management, and behavioral coaching. It estimated that portfolio construction advice (e.g., asset allocation, 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.

 

Asset allocation is an approach to help manage investment risk. Asset allocation does not guarantee against investment loss.

 

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

 

Of course, financial professionals can account for additional value not studied by Vanguard, such as helping clients implement wealth management strategies, which may help protect against the financial consequences of loss of income, and coordinating with other financial professionals on tax management and estate strategies.

          

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.”

Office Locations

Louisville

2201 High Wickham Place
Louisville, KY 40245
502.753.0609

Cincinnati

100 E-Business Way
Suite 110
Cincinnati, OH 45241
513.842.1700

Bowling Green

1048 Ashley Street
Suite 301
Bowling Green, KY 42103
270.843.4115

Indianapolis

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Suite 170
Indianapolis, IN 46250
877.634.9757

Grand Rapids

607 Cascade West Parkway
Grand Rapids, MI 49546
844.476.2744

Elizabethtown

2901 Ring Rd

Elizabethtown, KY 42701
SCA 270.769.6371

270.990.9000

Paducah

4730 Village Square Drive
Suite 100
Paducah, KY 42001
270.443.8711

Bardstown

713 McDowell Blvd
Bardstown, KY 40004
502.348.1433

Atlanta

3625 Cumberland Blvd., Suite 1485
Atlanta, GA 30339
678.681.9518

All information herein has been prepared solely for informational purposes, and it is not an offer to buy or sell, or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular trading strategy. Portions of the content on this website were prepared by Marketing Library Inc.

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