The Reich Report_NEWSLETTER

I jokingly like to think that the advice we give at my firm is priceless whenever someone asks about fees and expenses, but I’m only half kidding. When someone starts off a conversation with an advisor, be it a financial advisor, CPA, attorney, etc. about fees, it tells me they may not yet see the value in what those advisors provide to their clients.

In our industry, Vanguard, which has long been the default go-to fund company for those who manage their own investments, (and one of my favorite managers) did a study to find out how much value having an advisor adds to an investor. The answer was about 3% on a net basis. That’s an awfully compelling argument for having an advisor when they typically charge about a third of that amount for the value they bring.

So where is a good advisor’s value really demonstrated? I think it’s in a few different areas, but clearly the most glaring is in performance.

Ironically, this is the reason most investors cite for not having an advisor, in that the fee an advisor charges reduces the returns to the investor. This argument has been disproven countless times, most notably in the recurring Dalbar Study, which compares the returns that a typical investor who manages their own money realizes versus one who uses an advisor. In 2018 alone, the average investor lost -9.42% vs. the S&P 500 -4.38%. That’s a full -5% of additional losses which is mostly attributed to poor investment decisions regarding market timing. If you remember, the fourth quarter of 2018 is when the market experienced a sharp 20% decline. At this point, many investors panicked and sold out of the equity markets. Sadly, many did not return because they were waiting until “things settled down.” As I‘ve mentioned before, often when markets start to recover there are few if any “signs” that a recovery is about to happen.

In 2019, right after that sharp decline in late 2018, the S&P 500 returned +28.9% and many of the investors who never returned to the markets, waiting to feel comfortable, missed out completely on those gains. Most recently we saw this in late March. We went from the fastest 30% drop in history to the fastest recovery in history, and again, sadly many investors got out and did not return.

There is a big difference between a short-term loss on paper and an actual long-term loss created by selling out at the wrong time. This can potentially translate to a lot of money for you and your family in retirement. This is where we see the value of a good advisor. Their job is to help you make sound decisions when your inclination is to panic. Now imagine having that advisor potentially protect you from these downturns year after year for decades. Think about how much more returns the average investor would have enjoyed had they had and followed good advice. A good advisor can help you to see past the short-term turmoil and keep you focused on your goals.

And advisors provide value well beyond performance. True financial planners can also help you in areas such as Social Security planning, retirement planning, estate planning, risk management and the list goes on. Many advisors, like us, don’t even charge for these additional services but simply consider it a part of the fees you’re already paying them. The same goes for CPAs or attorneys. I hear so many people say that they don’t want to spend the money on a good CPA, ironically when they are the very people who can sometimes end up saving you many times more than they cost in taxes, business sale structures, expense management etc. As for attorneys, I can’t tell you how many times I saw an estate turn into a nightmare because someone didn’t want to spend a little money on an attorney who could have helped them avoid many, if not all, of those issues beforehand.

Advisors are well versed in their fields and exist for a reason, which is to help you. Personally I always look to rely on those who are experts in their respective fields to help me make educated decisions in my life. You may be well served to consider doing the same.

T. Eric Reich, CIMA, CFP, CLU, ChFC is president and founder of Reich Asset Management and can be reached at 609-486-5073 or

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Reich Asset Management, LLC is not affiliated with Kestra IS or Kestra AS. Neither Kestra IS nor Kestra AS provides legal or tax advice. The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. Comments concerning the past performance are not intended to be forward looking and should not be viewed as an indication of future results. S&P 500 Index is an unmanaged group of securities considered to be representative of the stock market in general. You cannot directly invest in the index.

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