What Do You Expect from a Financial Professional?

If you are a PCA client, why do you work with us? If you are simply reading this blog but working with another firm, why do you work with that firm? If you are a Do-It-Yourselfer (DIY), why? I encourage all our readers to ask the applicable question. Think about your answers and/or write them down.

Vanguard completed an exhaustive study a few years ago seeking to quantify the value of an Advisor using best practices on behalf of a client’s portfolio. The link to this study is at the end of this article. Many of you likely won’t read the whole report so I am going to summarize some of the key findings and sprinkle in some experience and wisdom!

I’ve helped families for over three decades, so I’ve heard all the potential reasons you may have for your choices in this area. The most common reason a person tells me they are working with another firm currently is that they like their Advisor/Broker personally.

The most common reason a DIY person tells me why they are not working with a professional is because of the cost and a belief they will not receive value equal or greater than the cost of a professional. Many DIY had a negative experience with a financial professional in their past, and assumed all financial professionals were the same.

Whatever the reasons, I respect that people feel the way they do whether valid or not.  The Vanguard study estimated the value of an Advisor, using best practices, may be equal to 3% additional rate of return annually. This may be higher or lower, depending on individual family circumstances.  3% annually! This is the conclusion of the Vanguard study and guarantees you nothing.  However, I don’t know any Advisor in the industry charging 3% annually in fees.

The challenge for consumers is to better understand what “best practices” are. Of course you want to work with an Advisor you like personally, but this doesn’t have to come at the sacrifice of greater return due to best practices.  If you are a DIY, you likely view Vanguard favorably as that fund family has been the darling of DIY portfolios for a long time.  If Vanguard is indicating you may be able to improve your rate of return with an Advisor, you might consider this possibility.

Vanguard put “best practices” in the following categories: Asset allocation; Cost-effective implementation; Rebalancing; Behavioral coaching; Asset location; Spending strategy; Total return versus income investing.

I am the first to agree that much of the financial industry does not bring these resources and guidance to every family.  At PCA we implement some of these strategies without it being a big discussion with a client.  Best practices are a part of our culture and value proposition.  This post is a wakeup call to any readers who view financial professionals as a commodity.  The Vanguard study is fascinating to me, but not surprising.

If you work with another firm or are on your own (DIY) and want to learn more, we provide a process to do just that in a very comfortable way. You would commit some time as education always requires. We are willing to commit time as well to teach.

You can also keep going it alone or sticking with “the nice guy/gal”! I have seen the benefits of best practices, such as Vanguard recommends, and me and my PCA team are super nice!  Thank you for reading.

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