Good Advisors Add Value

I add value to my clients in a variety of ways. Objectively, a Vanguard study shows I may add 3% in average annual returns for my clients. This is far in excess of my tax-deductible fees.

How, you may ask?

1. I help clients stick to their plan. I recently had a new client balk at adding new money as we had planned. He mentioned he was afraid about he upcoming election. I referred him to article about how we can be our own worst enemy. And, to this one about how market pricing works. See the entire series about some of my thoughts on investing here. Bottom line? An advisor may help you earn 1.5% on top of your average return.

2. I locate your assets in their proper account. You may have several different accounts each with their own tax consequence. There are appropriate assets for each account. You could consider it a scale of worst, good, better, best. And, each investment you hold will have a tax-preferred location that should be carefully considered.

Where would you put your stock index fund account? Your muni bonds? You annuity? Your emerging market stocks? Your real estate? Bottom line? 0.75% additional return because of tax savings or the prevention of tax mistake.

3. I recommend institutional fund shares or institutional family funds that are not available to retail investors. Why? they have lower fees for investors and better cash flow for money managers. Bottom line? 0.45% additional return through savings and cash flow improvements.

4. I recommend an appropriate portfolio and regularly rebalance. This is where many investors have no idea how risky their portfolio is. I make it right for you in a variety of ways. Additional return? 0.35% over time.

5. I help clients in their decumulation phase. Selling to support your retirement spending in the appropriate order increases returns. By helping clients with their annual distributions during their retirement, advisors can add another 0.70%.

Remember the variety of accounts you have; IRA, Roth, 401k, taxable brokerage, annuity? Withdrawing from each of those is easy. However, managing the order to minimize your tax and maximize your after-tax return takes a bit of work.

Do it the right way. Pay an advisor for their expertise, get advice to your particular situation, and get better returns overall. If you pay less than 3% on average, you come out ahead. It’s a win-win for you and the advisor. It’s a lose for uncle Sam.

Be well, Dan