Envestnet Calculates An Advisor’s Value-Add At 3%

Envestnet, a leading provider of financial solutions to advisors and institutions, estimates that hiring a financial advisor can be worth around 3% more in value compared to a do-it-yourself approach. This is accomplished through financial planning, asset allocation, investment selection, systematic re-balancing and tax management.

In practice, I’ve seen this to be an accurate estimate. I regularly see prospective clients with the following issues:

• Extremely concentrated in US large stocks
• Lack of defined financial goals
• Letting emotions and “gut feelings” drive bad investment decisions
• High-cost mutual funds that under-perform their benchmarks
• No plan or discipline in regular re-balancing
• Inefficient placement of investments causing higher taxes than necessary

Dealing with your finances and money can be difficult for many people. We regularly let our emotions, biases, and busy lives interfere with properly managing our money. Just like a personal trainer can help someone define, and ultimately achieve, physical goals by holding them accountable and providing expertise – so too can a good financial advisor help in achieving financial goals.

Steven Elwell, CFP®
Aug. 12, 2016

Steven Elwell
Steven Elwell