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The Value of a Wealth Advisor

Category: Articles Published: Monday, 01 August 2011 Written by Administrator

What's the Value of a Personal Wealth Advisor?

1. Investment management services. Implementing an investment program requires giving careful thought to risk, time frame, goals, taxes, choosing a strategy, doing the investment research, and implementing and monitoring the strategy. Most people who seek out financial advisors don't want to take the time to do this, regardless of whether they believe they are capable of doing it or not. Hiring an advisor is a time-saver.

2. Handholding and discipline. Many people seek out advisors because they are not confident in investing by themselves. While there are a growing number of sources of easy-to-follow advice (e.g. online advice, newsletters, and fund company asset allocation services), many people are not confident in assessing whether these are right for them. Our experience suggests that many people really value the human connection they get from the advisor, and it is this connection that is the source of the trust and confidence they need to commit to and stick with an investment program.

3. Competitive performance. It is our experience over many years that the majority of clients are satisfied with competitive performance and don't necessarily expect their advisor to deliver consistently market-beating performance, provided that they are properly educated. They recognize that the advisor adds value by delivering competitive performance at appropriate risk levels and by bringing discipline to the table, helping to avoid significant mistakes. Of course, there is some subset of the client market that is very performance-oriented. This is why it is so important for clients to make sure they understand our investment philosophy and that clients have realistic expectations. We don't over-promise. We focus on helping clients have the highest degrees of probability of achieving their goals within their time horizons.

4. Fees must be reasonable to allow for competitive performance. Fees on a typical qualified plan are taken from fund performance and not transparent to the consumer. These opaque fees reduce return on investments by up to 10% annually. We believe total investment costs over 3% make it extremely difficult to deliver competitive performance. In our platinum financial advisory practice we charge 1% of net worth. Further, with lower holding costs typically to less than 1% for investments we select. The typical 2%+ investment cost savings combined with our confidence of our fund due to diligence, tax savings through tax-efficient investments, our asset class research, and our proactive investment management style can more than make up for the fee over the long run, regardless of the return environment.

5. Continuity. Advisors can step into a void left by a key person with timely and valuable personal advice backed by personal knowledge and up-to-date vital records so that families and businesses can continue with minimal mistakes and a smoother and brighter transition into a more secure tomorrow.

6. The value of an advisor is greater in a low-return environment. We realize that clients might not easily recognize this, but nevertheless it is true. It becomes an issue of understanding the difference between what the market is providing and what the advisor is providing. In a high-return environment, the absolute returns easily cover the fees but require little work. When the market isn't just handing out high returns, the value of investment picking is amplified. Obsessively thorough due diligence conducted with a high level of intellectual integrity is, we believe, even more important and can add more value. In addition, our asset allocation approach, which allows us to look at many asset classes, gives us a fairly wide array of investment opportunities to pursue. Note that past performance is no guarantee of future results. Further, each client portfolio is unique to that individual's needs.

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