THE VALUE OF GOOD FINANCIAL ADVICE

Peace of Mind

There are many good reasons for establishing a relationship with an experienced financial advisor. You may not have the time it takes to actively manage your wealth. You may not have the expertise needed to do it well. Perhaps you just want the peace of mind that comes from knowing your wealth is in the hands of experienced professionals who will be there for you and your family through the good times and difficult ones.

There’s another compelling reason for the value of financial advice. Good financial advice may actually increase your wealth beyond what you might be able to do on your own.

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EFFECTIVE WEALTH MANAGEMENT:

Easier Said Than Done

Vanguard, one of the world’s largest investment firms, conducted a study that attempted to quantify the value of financial advice. They found that while benefits varied greatly depending on individual circumstances, good financial advice can potentially add up to 3% per year to the returns individuals might otherwise achieve on their own.¹

Vanguard estimated that roughly half of this potential increase resulted from behavioral coaching that helped reduce or eliminate much of the emotional aspects of investing. Vanguard attributed much of the rest to a host of practices individuals often overlook or are unable to implement.

¹https://advisors.vanguard.com/content/dam/fas/pdfs/IARCQAA.pdf

VANGUARD REPORT

Behavioral Coaching

Human nature tends to opt toward conservatism at times of apparent risk and risk-taking at times of apparent calm.² Unfortunately, this tendency can work against the investor. Selling when the market takes a sharp downturn or buying when it experiences a surge can lead to a cycle that is both emotionally draining and financially suboptimal. Good financial advice from the right advisory firm can help you develop the perspective and discipline to stay the course when it is beneficial to be conservative or take more risk when your circumstances and mindset warrant it.

²Pompian, Michael M. (2015) Behavioral Finance and Wealth Management: How to Build Investment Strategies That Account for Investor Biases. Hoboken, New Jersey: John Wiley & Sons, Inc.

Asset Allocation and Diversification

Your asset allocation should match your financial goals and your tolerance for volatility and risk. This requires a delicate balance, and can change many times during your lifetime. Good financial advice can help you identify these shifts and adjust your investments and financial plans accordingly.

Rebalancing

Over time, investments can drift away from the target allocation intended to balance your risk and return. An advisory team will monitor these movements and, with the help of skilled investment professionals and tools, can recommend and implement tax-optimized strategies to bring it back in line.

Asset Location

In general, holding tax-efficient investments in taxable accounts and income-producing investments in tax-advantaged accounts can generate a higher net return by reducing the tax impacts. Good financial advice from an advisor with access to a team of experts can help you locate investments to support your lifestyle while trying to reduce the tax impact today and over the long term.

Effective Portfolio Withdrawal

Determining where, when and how much to distribute from your portfolio may sound simple, but it can actually be a nuanced and complex decision. A skilled advisor has access to strategies designed to lower your total taxes and minimize large drawdowns at inopportune times in order to support your wealth goals and the longevity of your portfolio.

Total Return vs. Income Investing

Should you employ a total return or an income-only investment approach? There is no one right answer for everyone, but an advisor who truly understands your goals can recommend a personalized approach that works for you.

Cost-effective Implementation

Every extra dollar you spend on fees, trade execution, and taxes can reduce your potential return. Thoughtful financial advisory firms pay attention to these details, work to minimize transactions and negotiate lower costs on your behalf. Costs should be transparent, and higher cost strategies should only be recommended when the overall risk/return profile of the investment remains attractive.

Advanced Financial Planning

The Vanguard study did not address the potential value from many aspects of financial planning. Comprehensive planning can include estate planning, tax planning, risk management and advanced strategies that address circumstances like concentrated stock positions, business transitions, defined benefit planning or charitable giving. Though harder to quantify, effective planning can have a significant positive impact on your wealth and financial wellbeing.

How to Choose a Financial Advisor

Today, the value of financial advice extends well beyond a thorough understanding of investing. It includes planning and tax issues as well as emotional and technical considerations. It requires expertise, sophisticated tools and attention to detail. Choosing the right financial advisor is not about finding someone who can pick a stock or offer the lowest advisory fees. It’s about finding someone who can help you take full advantage of the tangible and intangible benefits of good financial advice.

At HoyleCohen, we are driven to help clients capture as much of this potential value as possible through our comprehensive approach, expertise, robust investment capabilities and deep relationships. Being your lifelong wealth management advocate and providing you with meaningful value will always be our priority.

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Wealth by Design

Let HoyleCohen show you what personalized wealth management is all about. Schedule a complimentary consultation today, or call the office nearest you:

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San Diego (858) 576-7300 / Santa Monica (310) 586-1828 / Sacramento (916) 588-2960

THE VALUE OF GOOD FINANCIAL ADVICE

EFFECTIVE WEALTH MANAGEMENT:

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