Updated Vanguard: Your Advisor Adds Up to, or Even Exceeds, 3% in Net Returns
The Vanguard Group has long been considered a company squarely in the investor’s corner in part because of its ground-breaking research into low-cost index funds done back in the 1970’s by its founder John C. Bogle. Vanguard has produced research since 2001 pointing out how an advisor using Vanguard Advisor’s Alpha Strategy can add up to or even exceed 3% value in net returns to your portfolios.
The Vanguard Group has long been considered a company squarely in the investor’s corner in part because of its ground-breaking research into low-cost index funds done back in the 1970’s by its founder John C. Bogle. Vanguard has produced research since 2001 pointing out how an advisor using Vanguard Advisor’s Alpha Strategy can add up to or even exceed 3% value in net returns to your portfolios. The latest July 2022 version of this research adds new information, updates to charts, and a new section on total return investing. In some circumstances the advisor may have the opportunity to add tens of percentage points of value — although this opportunity happens intermittently over the years of a relationship if at all.
The Secure Act seemed to suggest that you must take Required Minimum Distributions from your IRA in addition to the 10 year depletion, but it was unclear. Now that we are in 2022, many people have delayed taking those withdrawals for two years, waiting for clarity from the IRS! This could be an expensive problem. Normally, if you don’t take your Required Minimum Distribution from your inherited retirement account, the IRS levies a 50% excise tax on the amount not distributed! Do all these heirs owe the accrued penalties from the last two years? That could be a huge tax bill! The IRS has finally provided an answer, at least for those two missing years by issuing Notice 2022-53. But unanswered questions remain.
I am not going to use space here to attempt a replication of Vanguard’s research, but I recommend you read the significantly updated July 2022 version here or call our office for a hard copy at (360) 671-1621.
How is a good advisor adding value to you and how would you measure it? As always in life it behooves us to look carefully at the factors. Vanguard Research tells us the factors below add value to their clients’ accounts:
Suitable asset allocation using a broadly diversified portfolio of Funds and or Exchange Traded Funds.
Cost-effective implementation (expense ratios and trading costs).
Rebalancing the portfolio at intervals.
Behavioral Coaching (talking fearful investors off the ledge when markets move down or from being too greedy when markets move up).
Asset Location (taxable and nontaxable accounts and appropriate investments in each).
Spending Strategy (withdrawal order).
Total return versus income investing. (Vanguard has a new section in the report to clear up investor confusion)
Certified Financial Planners® strongly believe preparing a financial plan at the beginning of a relationship is the best way for clients to express to their advisor what is important to them. In the report Vanguard states it this way, “Beginning the client relationship with a financial plan is so essential. Not only does it promote complete disclosure about investments, but more importantly, it provides a perfect way for clients to share what is of most concern to them: their goals, feelings about risk, family, and charitable interests. All this information is emotionally based, and a client’s willingness to share it is crucial in building trust.” Our team of four advisors includes three Certified Financial Planners® who prepare financial plans for our clients.
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The content of this blog is for informational purposes only and should not be construed as investment, tax, or estate planning advice. Skyline Advisors, Inc. is an SEC Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where representatives of Skyline Advisors, Inc. are properly licensed or exempt from licensure. If indices are referenced in marketing material, it is important to note that these cannot be invest in directly, any vehicle such as Passive index-based ETFs and Mutual Funds which attempt to replicate indices have internal expense ratios and other associated costs that would negatively impact returns. No advice may be rendered unless a client service agreement is in place. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital.
