What is the Value of Your Advisor? | SJS Investment Services

What is the Value of Your Advisor?

July 16, 2019

At SJS, we are constantly analyzing the markets – how they’ve been doing, where they may be going, what we’re doing about it. While it makes for lively discussion, we believe that making any significant changes to your portfolio based solely on headlines is investing on speculation rather than evidence.

Market timing can have an effect on your return, but not in the way you may hope. The lure to buy or sell based on the news is certainly enticing, but the average investor ends up with meaningful underperformance in both the equity and fixed income markets when doing so.

The 2018 DALBAR Quantitative Analysis of Investor Behavior shows, time and time again, that average investors fall into psychological and behavioral biases that often cause them to buy and sell at the wrong times, costing nearly 2% annually in the equity markets, and more than 4% in fixed income, over a 20-year period.1

Another classic example of how investor behavior can impact returns comes from Peter Lynch’s famous Magellan Fund. The Magellan Fund doubled the S&P 500’s return during Lynch’s 1977-1990 managing tenure, posting a 29% annualized return. However, he found that the average investor in his fund posted a return of only roughly 7% a year during the same period.2 Money would leave when the fund had hiccups, only to flow back in after it was back on track, missing any recovery.

One approach to combat the emotions that may tempt us to buy and sell at the wrong time is to have a trusted advisor. Someone who can help us see compelling valuations when times feel tough, and help identify risks when investing feels like a “sure thing.”

Numerous studies have shown the estimated value of a financial advisor to be worth anywhere from 1.6 to 4.1 percent, annually. 3,4,5,6

While each of these studies applies a different research methodology, SJS strives to implement many of the “value-add” services they highlight. We believe the value of your SJS advisor includes:

  • Designing portfolios to support your goals.
  • Consolidating and simplifying your holdings.
  • Helping you optimize expected returns based on the risk you are willing to assume.
  • Reviewing your current investment approach and recommending revisions that might make sense for you.
  • Monitoring and managing your taxable investment activity.
  • Communicating with your tax, legal, and financial professionals.
  • Benchmarking portfolio returns on your quarterly reports.
  • Adjusting your portfolio based on market conditions and your situation.

If you have questions, feel uncertain about the markets, or simply need a listening ear – give your SJS advisor a call. Your family, your future, your legacy depend on sound investing.

Past performance is no guarantee of future results. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio.

1 Quantitative Analysis of Investor Behavior (QAIB) Report. Dalbar, 2018.
2 Heads I Win, Tails I Win: Why Smart Investors Fail and How to Tilt the Odds in Your Favor. Spencer Jakab, 2016.
3 Advisor’s Alpha. Vanguard Research, 2014.
4 Capital Sigma: The Sources of Advisor Created Value. Envestnet|PMC’s Quantitative Research Group, 2015.
5 Alpha, Beta, and now…Gamma. Morningstar, 2013.
6 Value of an Advisor Study. Russell Investments, 2017.