We’ve written before about the often-cited Vanguard “Advisor’s Alpha” study. That research documents the data showing that a good financial advisor can add on average a full 3% in incremental return to a client’s investment portfolio annually. The study then breaks that 3% down into its component parts, showing that the biggest gains–a full 150 basis points–come from effective behavioral coaching that serves to prevent clients from engaging in detrimental investing behaviors (think buying high …
Control. Control. You must learn control. – Yoda, Star Wars Episode V: The Empire Strikes Back Approximately 57% of Americans are financially literate, typically measured by answering simple financial literacy questions correctly. The work of Anna Maria Lusardi and her colleagues have demonstrated the woeful state of the world related to financial knowledge and education in the United States and around the world. Often, this group of researchers measures financial literacy with a few …
A hot topic in the financial advisory space—or maybe more accurately a sore subject—is the high rate of attrition of heirs when clients die and leave their managed wealth to beneficiaries. We have discussed this topic before, noting that a host of factors are at play including critical features like communication with the family-economic unit, relationship building, and personal differences resulting from a generational divide between the heirs and the advisor. But at the end …
All of the studies and resulting data that have looked at the issue appear to agree that client behavioral management is one of—if not the most—important functions of financial advisors. In one of the seminal research studies—although not technically an inquiry into the role of financial advisors in relation to client behavioral management—the researchers concluded that of all the activities undertaken by large corporate pension fund managers, strategic portfolio allocation accounted for on average 93.6% …
The gradual migration away from the traditional defined benefit pension plan and toward the new-normal of the defined contribution 401(k) plan is on its surface a paradigm shift that can only be good for corporate profits … right? Undoubtedly the offloading of the burdensome pension liability that employers previously shouldered to the ranks of employees is saving corporate employers big money in pension expense, but new data is suggesting that the new retirement-plan model is creating …

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