How Much Value Does a Financial Planner Add?

Hiring a financial planner can be expensive. I get it. Any conscientious person must ask themself—Is hiring a planner worth the cost?

The Morningstar.com article by David Blanchett, CFA and Paul Kaplan titled Alpha, Beta, and … More Gamma: How advisors add value through a robust portfolio-planning process explains how they set out to answer that question, and what they found. The bottom line: “We find that an advisor’s reasonably priced robust investment framework can add the equivalent of 2.5% of annual outperformance for an average investor, further evidence that working with an advisor can improve not only investors’ experience but their ability to reach their financial goals.”

Their calculation assumes that the “advisor provides comprehensive, high-quality portfolio services for a reasonable fee.” That could be the tag-line for Prism Financial Planning! 

They continue by writing that “providing other financial planning services, such as savings guidance, pension optimization, insurance planning, and withdrawal planning, will likely result in even more value for the client.”

Below is a chart from the article, that breaks down where advisors add value, and by how much.

If you’d like to read the whole article, but can’t access it online, feel free to email me at amy@prismfinancialplanning.com, and I’ll have the article emailed to you.