Quantifying a financial advisor’s value has become easier in recent years as financial services firms have undertaken and completed studies on the matter. Firms such as Vanguard, Morningstar, Dalbar and most recently Russell Investments, have added to the body of knowledge on this topic.
The significant global changes of the past 24 months have prompted more than a few investors to consider seeking out a financial advisor to help them navigate the marked changes in the investing landscape. In doing so, investors are trying to determine the value they hope to receive in exchange for the advisor’s costs. That can certainly be a challenge. Now, thanks to the work of leading global investment manager Russell Investments, part of the answer is clearer to see for 2022.
Studies Can Help Quantifying a Financial Advisor's Value
Russell has developed a formula to help determine the tangible benefits of working with a financial advisor. The Russell formula identifies four separate financial advisory services and measures the value of each, noting that in 2022, investors might add an extra 4.91% of investment return. The study quantifies how making better financial planning and investment decisions can lead to better investment results.
Many investors believe that the growth of their nest egg depends on the investments they pick. Â The more successful the investments, the bigger their nest egg will grow. Â As it turns out, specific investments are typically less important than several other factors and portfolio-building decisions.
Russell’s study looked at four services a financial advisor can offer to help investors make better financial decisions:
- Active rebalancing of investment portfolios;
- Behavioral coaching;
- Tailoring the client experience around family wealth planning; and
- Tax-aware planning and investing.
The study found that “following a holistic family wealth planning process” leads to additional investment returns.  These results are directionally correct with the consistent results of the prior year studies completed by Vanguard, Morningstar and Dalbar.
Quantifying a Financial Advisor's Value Can Be Reflected Beyond the Results of Studies
In our practical experience working with clients over the years, advisors can also add meaningful additional value that is not reflected in the Russell study. A good advisor can help provide you with so much more:  help in spotting risks and issues that need your attention; thoughtful counsel about how to provide financial support and help with building positive money behaviors for those you love; how to best help family members with special needs; and how to develop purposeful philanthropy, just begin to scratch the surface of more value available to you from a good financial advisor.
Our Proprietary Guide Helps You Quantifying a Financial Advisor's Value
The value of an advisor expands with interdisciplinary training and depth-of-field.  A good advisor can provide collaborative leadership for your other advisors – accountant, estate planning attorney, insurance professional – to help ensure you are benefiting from a whole-system approach to managing your wealth.
Working with an advisor to help you make better decisions can result in more than just peace of mind. Doing so can result in concrete and quantifiable value and help create better outcomes for those you love and care about. Use our guide, Selecting a Wealth Management Professional, to help you in quantifying a financial advisor’s value.
