Advisors offer processes, objective advice and can be a sounding board when a client panics during heightened market conditions. After all, it is their own money and future at stake. Behavioral CoachingĪn individual investor can be his own worst enemy since it is hard to put emotions aside and acknowledge biases that may exist. Regular rebalancing has the added benefit of harvesting losses or minimizing capital gains as an advisor concentrates on tax planning for their client. An advisor adds the discipline of systematic rebalancing and monitoring, aligned with understanding investors’ goals. If that client also has withdrawal needs, the increased equity allocation makes liquidating assets for withdrawal more challenging, particularly if markets are down. Setting and forgetting adds undue risk to a client’s portfolio, further magnifying volatility during market swings. For example, the Russell Investments study cited above illustrates how without any rebalancing, a portfolio allocated to 60% equities and 40% fixed income at the start of January 2009 would have adjusted to 82% equities and 18% fixed income by the end of 2022. ![]() These changes over time can have significant implications for the investor’s goals and the portfolio’s performance. When markets rise or fall, an investor’s portfolio can be meaningfully impacted, with the allocation becoming misaligned and the risk profile altered. The Russell Investments 2023 study, “Value of an Advisor,” quantifies multiple ways the advisor adds value to a client’s portfolio due to a holistic focus 1: Active Rebalancing of Investment Portfolios But what is missing in taking this approach? What actually are the benefits of working with a financial advisor? Therefore, performance seems to be an easy way to evaluate your advisor. Available benchmark information encourages this focus on matching or beating the market. As an investor, it is easy to get caught up chasing returns and seeking yield in a portfolio.
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