How Much is a Financial Advisor Really Worth?

Posted on April 17, 2014 by Dr. David Edward Marcinko MBA MEd CMP™

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And … Can it be Quantified?

Doctors and FAs

[By Staff Reporters]

How much of a boost in net returns can financial advisors add to client portfolios? According to Vanguard Brokerage Services®; maybe as much as 3%?

The Study

In a recent paper from the Valley Forge, PA based mutual fund and ETF giant, Vanguard said financial advisors can generate returns through a framework focused on five wealth management principles:

• Being an effective behavioral coach: Helping clients maintain a long-term perspective and a disciplined approach is arguably one of the most important elements of financial advice. (Potential value added: up to 1.50%).

• Applying an asset location strategy: The allocation of assets between taxable and tax-advantaged accounts is one tool an advisor can employ that can add value each year. (Potential value added: from 0% to 0.75%).

• Employing cost-effective investments: This component of every advisor’s tool kit is based on simple math: Gross return less costs equals net return. (Potential value added: up to 0.45%).

• Maintaining the proper allocation through rebalancing: Over time, as investments produce various returns, a portfolio will likely drift from its target allocation. An advisor can add value by ensuring the portfolio’s risk/return characteristics stay consistent with a client’s preferences. (Potential value added: up to 0.35%).

• Implementing a spending strategy: As the retiree population grows, an advisor can help clients make important decisions about how to spend from their portfolios. (Potential value added: up to 0.70%).

Source: Financial Advisor Magazine, page 20, April 2014.

networking advisors

The Fine-Print

But, Vanguard notes that while it’s possible all of these principles could add up to 3% in net returns for clients, it’s more likely to be an intermittent number than an annual one because some of the best opportunities to add value happen during extreme market lows and highs when angst or giddiness [fear and greed] can cause investors to bail on their well-thought-out investment plans.

More: http://www.CertifiedMedicalPlanner.org

Assessment

Most retail financial services products are designed to enhance the well-being of the Financial Advisor and/or vendor at the expense of clients. The clients get only the leftovers. Of course, no one tells them that secret. They have to figure it out for themselves. As the old line goes, “Where are the customers’ boats?”

Source: Rowland, M: Planning Periscope [Where Advisors are the Clients]. Financial Advisors Magazine; page 36, April 2014

Conclusion

Are doctors different than the average investors noted in this essay?

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