A look at the role of a financial advisor


The role of a financial advisor varies within the industry. Fran Kinniry of Vanguard Investment Strategy Group discusses the “real” value Vanguard financial advisors offer clients.

Notes:

All investing is subject to risk, including possible loss of money you invest. Diversification does not ensure a profit or protect against a loss.

Advice services are provided by Vanguard Advisers, Inc., a registered investment advisor, or by Vanguard National Trust Company, a federally chartered, limited-purpose trust company.

This webcast is for educational purposes only. We recommend that you consult a tax or financial advisor about your individual situation.

© 2017 The Vanguard Group, Inc. All rights reserved.


TRANSCRIPT

Amy Chain: Fran, why don’t you spend a minute and talk to us a little bit about advice and our view on the value?

Fran Kinniry: Yes, sure. Several years back we created Vanguard’s advisor outfit. And it was really around what the advisor through Personal Advisor Services can actually deliver. The original, let’s go back a decade or two, the role of an advisor was traditionally hire me as your advisor, I’ll out perform a benchmark. And you would do that through security selection, mutual fund, hire/fire, or tactical allocation. More international, less, buy stocks and bonds.

But what we really found is the real value of an advisor, and Todd touched on this, when he meets a client, getting to know them. What are the interests of the family? What is the family trying to achieve? Developing a plan and putting that plan in writing. Making sure that plan’s in writing so you do not abandon that.

And so what we have found is that the cost of advice is extremely marginal relative to the benefits that advice can have in tax planning, rebalancing, gifting of assets . . .

Amy Chain: Can you talk about the behavioral coaching?

Fran Kinniry: The behavioral coaching alone. We look at our funds and we have, we know is the behavioral gap. It measures, and not to get too technical, the dollar-weighted return of our funds to the time-weighted return of our funds. And what we know is that our own Vanguard investors do a lot better than the industry, but they still trail the funds that they invest in by 75 to 100 basis points because they tend to buy after good performance, or sell at the bottom.* So we really believe in the value of advice. But it’s advice under that tenor of wealth planning, financial planning, behavioral coaching.

Amy Chain: You mentioned basis points. Let’s quick define that for some that might not understand what we’re talking about.

Fran Kinniry: Yes, so 75 basis points would be three-quarters of 1%. So when you’re starting to think about 100 basis points would be 1%, 75 basis points would be three-quarter of 1%.

*Source: Morningstar. Data as of January 31, 2017.

Important information

All investing is subject to risk, including possible loss of money you invest. Diversification does not ensure a profit or protect against a loss.

Advice services are provided by Vanguard Advisers, Inc., a registered investment advisor, or by Vanguard National Trust Company, a federally chartered, limited-purpose trust company.

This webcast is for educational purposes only. We recommend that you consult a tax or financial advisor about your individual situation.

© 2017 The Vanguard Group, Inc. All rights reserved.