What’s the real value of a financial advisor? Ask Vanguard
At Cox Financial Group, we believe that great financial advice is about more than just picking the right investments – it’s about delivering long-term value, clarity, and peace of mind. And we’re not the only ones who believe that. Vanguard, one of the world’s largest investment management firms, conducted a landmark study titled Advisor’s Alpha, which quantifies the real value that professional financial advice can provide.
According to Vanguard, a skilled financial advisor can add approximately 3% in net returns per year for their clients. But where does this value come from?
The Key Drivers of Advisor Alpha
Vanguard outlines several core areas where advisors can make a measurable impact:
1. Behavioral Coaching (~1.5%)
Investors are often their own worst enemies when it comes to emotional decision-making. Selling during a downturn or chasing returns during a hot market can derail long-term plans. One of the most valuable roles we play is helping clients stay the course during turbulent markets and making decisions based on strategy, not emotion.
2. Asset Location & Tax Efficiency (~0.75%)
Placing the right investments in the right accounts – like RRSPs, TFSAs, or corporate accounts – can help reduce taxes and improve after-tax returns. This often-overlooked strategy can significantly enhance long-term outcomes.
3. Spending and Withdrawal Strategies (~0.7%)
For retirees or those approaching retirement, deciding how and when to draw income can have major implications on both taxes and portfolio longevity. A coordinated withdrawal strategy across various accounts can lead to more sustainable and tax-efficient income in retirement.
4. Portfolio Construction and Rebalancing (~0.35%)
While market timing is risky, disciplined rebalancing keeps your portfolio aligned with your goals and risk tolerance. Maintaining diversification and managing risk ensures you’re not overexposed to any one asset class.
Advice That Goes Beyond Numbers
While these figures are compelling, we believe the value of advice goes even further. Working with an advisor brings clarity to your financial life, provides accountability to your goals, and gives you confidence that you’re making informed decisions for your future.
The Advisor Alpha framework simply confirms what we strive to deliver every day: value through personalized, professional advice that puts your goals first.
If Vanguard, the industry’s low cost leader, believes there is value to working with a financial advisor – you should too.
Curious how our advice could add value to your financial plan?
Let’s have a conversation.