If you could potentially increase the return on your investments, would you be interested? A White Paper recently published by Vanguard postulates that a Financial Advisor can add up to 3% to your portfolio’s return. This is significant as Vanguard has always been a champion of the Do It Yourself investor. But, Vanguard remains true to its roots and doesn’t imply that Advisors can pick investments with any great ability. Vanguard predicts the increase based on things you may not have thought of. Here are the amounts and areas where Advisors can increase your return
- Behavior Control, up to 1.50%. Keeping your eyes on the long-term horizon and off the daily financial news
- Asset Location, 0% to 0.75%. Putting your assets in the correct accounts…tax advantaged or taxable
- Using Cost-Effective Investments, up to 0.45%. Keeping costs low can increase your return
- Rebalancing, up to 0.35%. As investments grow (and decline) your allocation will morph. An advisor ensures that you stay in your target band.
- Spending Strategy, up to 0.70%. Selecting the right assets and the right accounts while drawing down assets is an important value add.
Is Vanguard right? I don’t know. They have the research to back it up (read the white paper here). I do know that these areas are areas that I focus on when we “Control the things we can Control” (something my clients have heard me say many times).
What do you think. Is Vanguard right?