The Value of Advice

Have you ever read the article or heard a story that alludes to how different the returns are of a particular fund or index vs. the actual return of the investor?  Wonder why?

The background of the reason is that the investor’s behaviour is what caused them to underperform that actual fund or index. Meaning, their decisions as to when to sell (typically in a down market) and then when to buy (typically after recovery – solidly locking in a permanent loss) is the reason for underperformance.

Behavioral finance experts have related making investment decisions during such periods of heightened volatility to driving while feeling the symptoms of vertigo. Timing markets based on the latest natural disaster, geo-political scare or epidemic too often spurs investors to shoot from the hip, so to speak. Reacting in the moment poses a real and present danger — getting sucked up in the latest market head fake and missing out on any subsequent rebound.

Synthesis and behavioural planning may be deemed “priceless” however research has put a price on this cost of poor decision making at 2-3.5% per year.  PER YEAR!!!!

So, understand that when I see the ads on tv advertising the do it yourself option and even my husband looks to me as if to say “maybe I should hire them”, I roll my eyes.  Is it misleading advertising when it exempts a major component?

However, I empathize with those who have suffered from less than desirable service from their Financial Institution. But, not all advice is created equally.

Let me elaborate.  

Our clients rarely make a financial decision without bouncing it off our team.  The number of years experience means we have seen multiple iterations of every possible scenario.  The ability to have a financial guru in your corner who intimately knows your family – that’s a hard value to quantify.

What about the Financial Vision that each of our families have that ensures we are all on the same page with respect to *how* we collectively make financial decisions for that family.  After all, each decision impacts the next generation.  Again, how does one quantify that?

There are however ways in which we can quantify – like the research that shows that our clients would solidly be earning 2-3.5% less without us!

In our work with clients we review the value of the advice *differently* .  we quantify the value.  Then we review that value as a % of fees.

In one example, a client joined us 8 years ago, we have worked with them in all aspects of their financial life – from de-risking to articulating what is really important to their family and the next generation.

We are figuring out how we can capture the values of each time the market sold off and our client wanted to sell and we ensured they didn’t.  Or, when we suggested legalese for protected their child’s interest in a downpayment on a home that the parents provided so that when the impending split from their common law spouse came, they were ensured the down payment remained intact.

However, we do have most items quantified now and we challenge the other top 5% of advisors to do the same.  Co-celebrate the success with clients.  Be open and honest about your cost and then review how the lion’s share is returned to clients’ bank accounts.  Its hard work, but it’s rewarding and don’t clients deserve it?

If your advisor is not *co celebrating success* with you then reach out to us and we would be happy to discuss our process.