Measuring the Value of a Financial Professional

Updated: May 25

Findings suggest that these relationships can make a difference for investors.


Provided by Robert Warther, Warther Private Wealth


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. [1]

How did this study arrive at that conclusion?


By comparing self-directed investor accounts to this model, Vanguard found that the potential return relative to the average investor experience was higher for individuals who had financial professionals. [1]

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. [1]


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. [1]

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.”


Robert Warther may be reached (239) 276-7939 or bob@wartherprivatewealth.com.

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. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.


Securities offered through Independence Capital Company, Member FINRA/SIPC, a registered broker-dealer. Investment Advisory services offered through Warther Private Wealth, LLC, a Registered Investment Advisor ("RIA"), registered in the State of Ohio. Independence Capital Company, Inc and Warther Private Wealth are not affiliated. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. The information contained herein is based on sources we believe reliable but is not considered all-inclusive. Past performance is no guarantee of future results. Please contact your Financial Advisor with information regarding specific investments. Opinions are our current opinions only and are subject to change without notice. Generally, investments are NOT FDIC INSURED, NOT BANK GUARANTEED, and MAY LOSE VALUE.

Citations.

1 - advisors.vanguard.com/iwe/pdf/ISGQVAA.pdf [2/19]

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