The Value of an Advisor: Beyond the Dollars

August 7, 2023

By cdarmody on August 7, 2023

When markets are soaring and investors are benefiting from a rising financial tide, it may seem easy to go about your investments alone. But when times are uncertain—economically, politically, or otherwise—a trusted advisor becomes a more valuable resource than ever.  

Research shows the long-term financial benefit of working with a financial advisor – Vanguard pinned the added value to financial advisor’s clients at approximately 3.75% per year.1 But there is also a less tangible, yet just as important benefit: advisors help clients manage their investing behavior in good times and bad. This behavioral component makes up roughly half the added value of an advisor, according to Fran Kinniry, head of the Vanguard Investment Advisory Research Center.2  

According to a 2021 Vanguard study, the behavioral aspects most likely to positively impact client returns include cost-effective implementation, rebalancing, behavioral coaching, asset location, and an effective spending strategy. 

A good advisor fills many roles, including as a trusted counselor, confidante, and guide. When it comes to managing clients in volatile markets, an advisor’s role expands to bring discipline and a long-term planning focus to the forefront. An advisor can help you: 

  • Stick to your financial goals and plan: A good advisor works with their clients to regularly reassess their financial plan and goals in changing conditions, rebalancing when needed but staying true to the goals that the investor has set for their family and future.  
  • Keep you calm in rocky markets: Tuning out noise, preventing hasty moves that are ill-researched or counter to the long-term financial plan, and managing emotional reactions so they don’t result in bad investment decision making are key roles of any advisor.  
  • Keep you invested, period: The Great Financial Crisis was littered with tales of investors who panicked and sold off their investment shares in favor of cash or gold, locking in their losses permanently and missing out on the market recovery. An advisor helps clients remain committed to their goals and plans and invested through all types of market conditions. 

Markets only go three ways—up, down, or flat—yet it’s impossible to predict with certainty what any given day, month, or year will bring. Given the unpredictable nature of the markets, it is important to have an advisor that can keep you focused on the big picture and your long-term goals, avoid impulsive decisions, and ready to take advantage of opportunities in the market as they come. 

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