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Studies show that Financial Advice can Boost Your Returns

Alex LaRosa, CFP®

Alex LaRosa, CFP®

Investment Advisor Representative

July 1, 2020

In today’s world, Robo Advisors and low-cost brokers make paying for financial advice seem futile. However, hard data from research done on the industry seems to side with human advisors in this matter. Here is some data to back that up. 

The Studies

Vanguard, who is the leader in low-cost investing, released a study titled Advisors Alpha. This study estimates that “clients who work with a good financial advisor will receive on average a 3% increase in the value of their portfolios each year”.

Morningstar also released a study of their own titled Alpha, Beta, and Now…Gamma. Their definition of “gamma” is the “extra income an investor can earn by making better financial decisions”. It computes the actual amount of improvement in investment returns to be at 1.82% per year for those who use professional advice to make their financial decisions.

Aon Hewitt’s study from 2008 shows that investors who sought advice enjoyed annual returns that were 1.86% higher on average than those who invested on their own. The study also highlights that these returns are boosted even more during periods of uncertainty like in 2009 and 2010. Those who had good financial advice during those years outperformed by nearly 3% annually. 

This year has highlighted importance of seeking sound financial advice. Data from Fidelity suggest that nearly 1/3rd of investors ages 65 and up sold all their stock holdings sometime between February and May of this year. With the recent market rebound, selling appears to have been the wrong move.

The fact is that financial advisors truly earn their fees by acting as behavioral coaches rather than money managers. They can be the voice of reason that will help you stay on course for your long-term financial goals.

If you would like to learn how we can help you create and stick with a long-term plan, give us a call at 610-825-3540 or schedule a call to speak with an advisor on our website.

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Studies show that Financial Advice can Boost Your Returns

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