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The Value of an Advisor: From Optimized Portfolios To Unemotional Decisions

Shanele Stoll Financial Planning

One of the most significant ways we believe we add value to our clients’ lives is simply by helping them see what they may not see on their own.

We might find opportunities for growth in their portfolio, establish their first comprehensive financial plan, or provide a vital sense of peace in those moments when emotions run high. We strive to help restore order and confidence, even in life’s most human moments.

“That’s the real value of working with someone who makes your goals their goals,” said John Vance, President and Visionary of Vance Wealth in Santa Clarita. “At Vance Wealth, we establish a plan for today with a vision of tomorrow, then methodically make adjustments and difficult decisions when necessary. We aim to firmly understand our client’s financial blueprint – better than many clients could possibly understand themselves.”

But don’t take our word for it.

In fact, the Vanguard Center for Investor Research performs extensive research on the topic, and they categorize the value of an advisor into three types of outcomes: portfolio, financial planning, and emotional.

 

  1. Portfolio Outcomes

When it comes to your portfolio, a wealth advisor can improve outcomes by evaluating risk/return characteristics, increasing lifetime tax savings, minimizing fees, and rebalancing accounts for optimal performance on a regular basis.

Bringing an advisor on board to perform these essential services led to meaningful changes for most¹, according to a Vanguard study of 44,000 self-directed investors. After working with an advisor, about 60% of investors decided to make changes to their equity risk-taking, 30% reduced their cash holdings, and more than 90% eliminated a bias toward familiar investments and diversified their portfolios.

Conversely, only 11% of these self-directed investors were considered “on target” with minor adjustments. “It’s hard to see the cost of a ‘good-enough’ investment strategy until you can see what a truly optimized portfolio can do for you,” John added. “But that’s where we strive to excel.”

 

  1. Financial Planning Outcomes

While investments are a crucial piece of the pie, an effective financial strategy goes far beyond the portfolio, helping you stay on target to meet your lifetime goals. For example, our CERTIFIED FINANCIAL PLANNER™ professionals advise clients in prudent saving and spending behaviors, debt levels, insurance and risk management, college savings, retirement planning, estate planning, legacy planning, and more.

Another Vanguard study examined the potential success rate of more than 100,000 self-directed investors in meeting their desired retirement goals. About 80%² of investors had an 80% or higher likelihood of meeting their goal. The remaining 20% had much lower probabilities, but more importantly, the data showed another trend.

Many of the on-target investors were actually over-prepared and living more modestly than they needed. With the guidance of an advisor, however, they could hit savings goals faster, invest their reserves for a higher return, or simply enjoy the peace of mind that comes with living a little more freely today.

 

  1. Emotional Outcomes

One of the most important benefits is harder to measure: the feeling of trust, security and protection that investors experience with an advisor on their team. Yet a Vanguard study found that emotional outcomes account for more than half³ of the assigned value that clients experience.

Why? Sometimes it’s the emotion we have to protect ourselves from. For example, uncertainty and fear about the future may have caused some people to sell their investments and go to cash when the pandemic started, but that would have resulted in lost money in the long run. While emotion is needed to inform the goals and desires of a big-picture financial plan, overly emotional decisions can often pose a threat, especially when an issue feels emergent or scary right now.

This is where, I believe, we shine as a firm. We guide our clients through turbulent and unexpected times, as well as the really good times, with the same steady plan,” John explained. “No matter what’s going on, we help ensure that your financial growth is constant. By taking a disciplined, long-term approach, we help you achieve your purpose and build a legacy you can feel good about.”

 

Wondering if a trusted wealth advisor could make a difference in your financial future? At Vance Wealth, we offer an initial consultation free of charge. See what we can uncover by booking online at vancewealth.com. Together, we can help you achieve more.

 

Source:

  1. Cynthia A. Pagliaro and Stephen P. Utkus, “Assessing the value of advice,” Vanguard Center for Investor Research, September 2019, 3-6. https://institutional.vanguard.com/inst-investor-researchcommentary
  2. Pagliaro and Utkus, “Assessing the value of advice,” 6-7.
  3. Pagliaro and Utkus, “Assessing the value of advice,” 7-9.

 

Disclosures: Past performance shown is not indicative of future results, which could differ substantially. All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed.  There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.