How Financial Advisers add value to their clients’ portfolios

I have just received a communication from Fidelity which invites me to (yet another) seminar). It contained a rather nice assertion from Peter Westaway, Chief Economist at Vanguard Asset Management, and I quote:

“Vanguard’s research shows that financial advisers typically add around 3%* a year to their clients’ investment returns.

They call this added value Adviser’s Alpha, and define it as the difference between the return that investors might achieve with an adviser, and the return that they are likely to achieve on their own.

Building on deep experience in the US, Canada and Australia, their Investment Strategy Group has identified seven key areas where UK advisers can make a critical difference, and estimated values for each area. Among the most important from an investment perspective are:

  • Asset allocation – Often the most important driver of long-term performance.
  • Rebalancing – Keeping the portfolio balanced over time adds real value.
  • Cost-effective implementation – Every pound paid in charges is a pound off your clients’ potential returns.
  • Behavioural coaching – Helping your clients avoid common behavioural pitfalls can substantially increase their chances of investment success.

*Source: Putting a value on your value: quantifying Vanguard’s Adviser’s Alpha in the UK. “

It’s nice to see some objective evidence of the added value a good investment adviser creates for his clients.  With a typical ongoing fee of only 0.5% p.a. of funds under administration (that’s my standard fee), most people see the economic sense after they begin a relationship with an independent financial adviser or other wealth manager, and begin to relax a little over their investments as they let a professional take the strain. So if you have pensions and/or investments of at least £100,000, and would like to see how you might benefit, please give me a call on 0345 013 6525  for a free initial assessment and see how I can help you.