Notes From the Fieldby Martin Weil

October 31, 2012

How to earn an extra 1.8% per year

Hire a financial planner. Or so says this Marketwatch article, citing a recent study by Morningstar. The core of their findings – a good financial planner adds significant value to a client’s wealth through “the extra income an investor can earn by making better financial decisions.”

The study cited asset allocation, tax efficiency, withdrawal strategies and liability-based investing (an institutional approach that is recently coming into its own in individual portfolios) as value-adding tools the typical planner has in his toolkit. All these add 1.8% per year in return over the average do-it-yourself approach.

So hooray for us. But I am waiting for a study that captures the additional wealth-enhancement in helping clients to make smarter financial decisions in all areas – financing, insurance, estate and tax planning. And what about the value of discouraging a client from investing in one of those “special opportunities” that are just too good to be true, to give one example of a benefit not captured in annual portfolio returns.

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