Index Universe just held their 7th annual Inside ETF’s conference in Hollywood, Florida and the CIO of Vanguard, Mr. Tim Buckley, gave the keynote address. He focused on one thing in particular during his address and that was the fact that financial advisors are under pressure from all sides these days to make sure that their clients get the results and returns that they desire.

Mr. Buckley also focused on the fact that, even with many factors making their job much more difficult, those financial advisors who use the basic concepts and tenets of their industry can actually add approximately 3 percentage points to the annual returns of their clients, as opposed to advisors who don’t follow these tenets or investors who don’t use a financial advisor to begin with.

Buckley elaborated on some of the sources of pressure that financial advisors face in this post-financial crisis era, including the fact that clients are looking for not just returns but impressive returns at a time when a 30% plus run-up has been recently seen by stocks and investment-grade bonds continue to sputter. This puts a lot more competitive pressure on a financial advisor (and their firm) to outperform others in order to land the “next big client”. He also noted that what appears to be innovation in the industry, as they embrace new products, is  simply proliferation  of the same old products.

This new product driven focus, in his opinion, has taken away from the fact that the real answer to consistent returns lies with the financial advisor and their advice, not any particular product. Indeed, he noted that the value of a financial advisor is something that’s taken for granted by most investors and that the most successful advisors are the ones that always follow best investing practices.

What are those best practices? They include;

  • A financial advisor also being a “behavioral coach” and guiding their clients correctly so that they stay on the right investing path
  • Helping their clients to be tax efficient using prudent asset location as well as spending strategies that are “tax smart”
  • Making sure that their client’s investment cost remains low
  • Rebalancing the clients portfolio in a disciplined manner

In the end, Mr. Buckley thanked all of Vanguard’s financial advisors and financial advisors in general for the services that they provide to their clients, including the important conversations that they engage in with them.   He also applauded them for truly caring about the goals of their clients and wanting to help them  achieve those goals by making a difference in the way they invest.

Filed under: Investing

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