The start of new year often sees re-evaluation of one’s current financial situation and relationships. As a prudent investor, you may have reflected on the benefits and fees involved with partnering with a financial professional to help manage your investments and long-term planning. Clients and prospects aren’t the only ones who have made these considerations. Large financial institutions and academics have conducted studies to quantify the seemingly qualitative added value a financial advisor can provide.
In 2017, Morningstar published a report that looked into the estimated value of financial advice and planning from a professional. Research from several firms in the report showed that added value could be generated from several “value-creating activities” such as financial planning advice, asset class selection, and more. Some research assigned significant added value, potentially up to 4% in returns, according to Russel Investments. Even Vanguard, which is known for its low fees and individual investor philosophy, determined that financial advisors can add significant value and introduced a personal advisor service in 2015. These estimated numbers are based on long term averages, and are not guaranteed, but consensus does exist.
One value-add that stands out is behavioral coaching, which encompasses helping clients navigate their financial goals with a long-term and disciplined approach. We believe that investors are aware of the importance of sticking with a well-planned investment strategy. At the same time, we also understand that it’s completely normal and human to experience emotional sway through difficult markets (such as 2020 and 2022!) on top of life’s twists and turns. These, among other reasons, could lead some to question whether they should pull out of the market. Our planning process is specifically built to address volatile markets while our investment team constructs well diversified portfolios to smooth our clients’ rides. In our meetings, we’ve advised you to continue to follow your financial plan and trust the process. In a 2022 white paper, Vanguard re-affirmed that this kind of behavioral coaching alone can potentially add value of up to 2% or more.
At Alaska Wealth Advisors you’ll find that we employ many of the planning and investment strategies listed in the above studies. Employing the services of a financial advisor is a life changing decision that is not usually made lightly. In this age of widespread individual retail investing, we understand that you’ll weigh the costs and benefits of paying for financial planning and advice. We encourage you to reach out to us to discuss how we can empower you to achieve your financial goals and provide added value to your lives.
Tuan Graziano
Associate Financial Advisor
2/6/23
These opinions are based on our own observations and third-party research, and are not intended to predict or depict performance of any investment. These views are as of the open of business on February 6, 2023, are subject to change based on subsequent developments, and are not intended as investment advice or to predict future performance. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. These views should not be construed as a recommendation to buy or sell any securities. Past performance does not guarantee future results. Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
