Vanguard Defines Value of a Financial Advisor in New Publication

Image: © Shutterstock

Image: © Shutterstock

Do you currently employ the services of a financial and/or investment advisor? If you do, and you have worked with your advisor for a while, you probably already understand and appreciate the value that advisor has brought to your table. If you do not work with an advisor, then you may have decided to devote your own time and effort into the development and the maintenance of a personal financial plan for life. In the process, you may have weighed the value an advisor can bring against the fees you pay for his or her services. As a financial and investment advisor for the past 41 years, I have a natural bias as it concerns the value of a financial advisor.

Enter Vanguard, the grandfather of no-load, do-it-yourself mutual funds — and now exchange-traded funds. For most of its existence, Vanguard has fostered a retail approach to investing for the average investor, except in its institutional division. The company has promoted its low-cost index funds as the be all and end all method of accumulating wealth.

Recently, Vanguard did a serious “about-face” and published a white paper entitled, Putting a value on your value: Quantifying Vanguard advisor’s alpha. Additionally, Vanguard recently published a brochure for investors entitled, “Learn how your financial advisor adds value.”

Case for a financial advisor

Kenneth W. Rudzinski, CFP, CLU, ChFC, CRPC, CASL, CAP

Kenneth W.

In these two comprehensive and unbiased publications, Vanguard makes the case for why financial advisors matter to the success of a client’s portfolio and to a client’s overall financial well-being. Whether or not you currently work with a professional financial advisor, I suggest you read the brochure. It helps one better understand what Vanguard believes is the main value proposition offered by most credentialed financial and investment professionals.

That said, I provide an overview of what Vanguard has proffered in the brochure and white paper. Some of the passages read as follows:

  • “It has been estimated that the right wealth management plan, properly executed, can translate into as much as a 3% increase in net portfolio return;”
  • “An experienced financial advisor provides customized portfolio management and discipline that can better position you to reach your long-term investment objectives. A good financial advisor will also build a relationship with you that goes beyond traditional financial planning and results in a more valuable financial life-planning approach;” and
  • “A skilled financial advisor has the training and insight to: 1) understand your goals, your dreams, and your reasons for investing; 2) help create an investment strategy that can meet your short- and long-term needs, 3) make sense of an array of investments…and determine how they fit into your financial plan; and 4) act as an effective behavioral coach to keep you focused on your objectives.”

Advisor needed in critical times

Concerning the financial advisor as “behavioral coach,” I would note that never was this role of a financial advisor more critical, and appreciated, than during the financial and investment crisis of 2008 and 2009, when many investors needed the calm assurance of an objective and experienced financial/investment advisor to stay the course, although around them fear, doom and gloom seemed to prevail.

The average investor during that crisis was easily unnerved by a daily barrage of panic-driven headlines and market pundits that focused almost exclusively on the movement of a particular stock or investment product/instrument within the last hour. However, financial advisors who had a well-found sense of market history served more or less as barriers or a defense against this negative onslaught. The reward, as the equity markets more than recovered their highs attained prior to 2007, is that investors who remained invested throughout that period have since seen their portfolios recover.

Vanguard addressed uncertainty in the market this way in the brochure: “Do you lose sleep when the markets slide? Or do you shrug off the market slide as the normal course of business on Wall Street? Your financial advisor can help you understand your emotional reactions to the risks of investing and can help you create a plan that suits your investment temperament.”

One last passage, in this case from the brochure, discusses the concept of balancing risk, as follows, “While increased risk offers the possibility of higher returns, it also can lead to bigger losses. Balancing the risk you are willing to accept with the investment returns you need or want is something your financial advisor will discuss with you.”

Plan for life

If you are at or near retirement, Vanguard reflects in this publication on the value of planning for a lifetime. This means that, according to the brochure, “As you enter retirement, your financial advisor’s ability to help you establish your spending plan, while positioning your portfolio for sustained growth can ensure that you enjoy a confident retirement.”

Some people invest on their own and succeed at it and others try that approach and fail miserably. Other investors just need some help. Wherever you are in that spectrum of types of investors, Vanguard provides clear and compelling reasons why the expertise and experience of a competent financial advisor may be of significant benefit to you and your family. Take a few moments to read the piece and see how it applies to your current situation. — by Kenneth W. Rudzinski

For More Information
Kenneth W. Rudzinski, CFP, CLU, ChFC, CRPC, CASL, CAP, a partner in the financial planning firm Heritage Financial Consultants, is a registered representative and investment advisor representative with Lincoln Financial Advisors Corp., a broker/dealer (member SIPC) and registered investment advisor. Rudzinski offers insurance through Lincoln affiliates and other companies. This information should not be construed as legal or tax advice. You may want to consult a legal or tax advisor regarding this material as it relates to your personal circumstances. CRN-942477-060914. Questions can be emailed to He can be reached at Heritage Financial Consultants LLC, 2036 Foulk Rd., Suite 104, Wilmington, DE 19810; 302-529-1264.

Leave a Reply

Your email address will not be published.