The modern community of financial advisory is well aware of how important the services such as retirement and investment planning as well as general financial counseling are. Nevertheless, the general public can underestimate the value of these services which is intensely influenced by the smartphone accessibility to financial services, robo-advisory, and low-cost brokerage services. Yet according to the industry research, the advisors’ role is still very important.
The industry studies
A low-cost investment management company called Vanguard Funds has published a study Advisor’s Alpha. According to the study, clients who work with a quality financial advisor are estimated to have a 3% annual value grow of their portfolios. Understandably, this progress cannot be proved to be linear and in perfect order. Instead, the study considers that the bigger part of such an increase comes during the periods of higher greed and fear on the markets which is the moment when advisors are supposed to provide their clients with assistance on following their financial goals.
In its whitepaper Alpha, Beta, and Now … Gamma, Morningstar supported the Vanguard’s opinion. The gamma in the name actually referred to the extra income received by an investor thanks to making better financial decisions. The whitepaper deems that investors who receive professional services from financial advisors register a 1.82% growth of their annual returns.
The outcome of these studies is the fact that financial advisors act rather like behavioral coaches than money managers. Seeking financial advice proves to bring higher annual returns which is also shown by another study from Aon Hewitt. It demonstrated that the annual return of those who received professional financial advice were on average 1.86% higher than of those who decided to seek financial advice in online sources. The numbers were proved to be higher once again on the example of receiving financial advisory during the uncertain years 2009-2010.
To sum it up, we can say that financial advisory comes truly in handy during the times when markets are volatile. The reason being redundant emotions influencing the investor. Moreover, another crucial task executed by financial advisors is helping the clients stick to their long-term goals.
COREDO provides professional financial advisory services for private profiles and companies. Please contact our office to arrange a personal consultation.