Part II: More Alpha
Part II: More Alpha
In part I, we discussed Vanguard’s Advisor Alpha Study which concludes that working with a financial advisor adds up to 3% value year over year. However, We think there’s even more to it!
In Part II, we look at other areas of added benefit that can add quite a bit more to a client’s bottom line.
Vanguard indicated several areas for added value:
- Suitable asset allocation using broadly diversified funds/ETFs
- Cost-effective implementation
- Rebalancing
- Behavioral coaching
- Asset location
- Spending strategy (withdrawal order)
- Total-return versus income investing
This Vanguard study only concentrates on the investment & income side. It doesn’t factor all the other help a financial professional brings to the table to add value; We can not only add value in other areas, we also help to prevent people from making big, and many times irreversible, mistakes.
Some other factors (but not all) to consider that a financial planner can help with:
Insurance
Life’s risks can’t be eliminated, but they can be mitigated through proper planning. Is your family protected with the correct amount and correct type of Life Insurance? What about protection if you’re too sick to work and earn a paycheck; have you considered protection with Disability insurance? Long Term Care? Even Property and casualty insurance.
Performing an insurance review can find the gaps you have, and maybe even can lead to freeing up money in your family budget.
Social Security Strategy
When is the optimal time to begin taking Social Security? What are the pros and cons to taking it early at 62? 66? 70? What is a good strategy for a husband and wife when coordinating benefits? How will this all effect my lifestyle in retirement?
The timing for taking social security will effect your income for the rest of your life; it’s important to make that choice with the best guidance.
Medicare
What are my Medicare options? Medigap supplement? Medicare Advantage plan? PDP? What and when are policies guaranteed issue? What’s the difference in each policy and from each different insurer? What happens if I don’t sign up right away?
When you originally sign up for Medicare, you have a guaranteed period to choose any plan you want. If you don’t know all your options, it can cost you now and for your entire retirement!
Other items of value….
What about your employee benefits at work? Is it better to have a 15 or 30 year mortgage? How about college planning, and after that, what’s the best way to pay down student loans? How about having a professional in your corner when you build your estate plan and legacy?
There are so many financial pitfalls that people need to be aware and a fiduciary advisor can add value by working in your best interest.
Of course I advocate for people to work with an advisor. I am excited about what I do for a living. It’s great to help people; and making a living while doing it is even better. Vanguard’s study proves it’s just a fact that working with a qualified financial planner adds real value!
And if you’re still not convinced, let’s do a quick analogy of your wealth and your health
Would you consider avoiding your family physician because you don’t want to pay for the service? Hopefully not, because if you consult with your doctor, get an annual physical each year and follow their advice, the odds are greater you will live a longer and healthier life.
The same thing applies to your financial well-being and goals. Working with a professional Financial Advisor does add value!
…and Vanguard just told us by how much.