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Here's a financial advisor's estimated value to clients
Here's a financial advisor's estimated value to clients

Yahoo

time5 days ago

  • Business
  • Yahoo

Here's a financial advisor's estimated value to clients

Financial advisors seeking a quick way to show prospective clients how their services pay for themselves many times over can use a new online tool calculating that dollar value. The "Financial Advisor Value Calculator" launched last month by lead generation and investor matchmaking service SmartAsset takes some basic information about age, income and retirement to estimate the difference in a client's final net worth, based on whether or not they worked with an advisor. Through assumptions about inflation, investment returns and a few other factors, and a formula that the company developed in a prior study, the tool offers a quick answer to a question on the minds of many potential clients, said Jaclyn DeJohn, a certified financial planner who is SmartAsset's director of economic analysis. READ MORE: Fee compression is coming, Cerulli says. Here's how to get ahead of it Closing the loop Through feedback channels like an "ask an advisor" inbox and monthly meetings with consumers on "the potential pain points," SmartAsset often hears from clients wondering whether advisors are worth their cost in terms of both their fees and the time spent with them in meetings and filling out documents, DeJohn noted. "People want to be sure of the value or the ROI that they're going to get. Being able to put the value on there, I think, is really valuable to drive people on the fence to further explore things," she said. "Exposing those areas of expertise and bucketing them all into a final dollar value can be really valuable messaging when you have only a few moments to get your message across." The study authored by DeJohn earlier this year arrived at a figure of 2.39% to 2.78% higher annual rate of return for clients who work with advisors — roughly similar to Vanguard's annual Advisor's Alpha report, which puts the value at about 3%. SmartAsset intends to follow up on the new consumer-facing calculator with a version that advisors can use through their own firms. Its compliance teams have vetted the tool to ensure it's in line with industry rules. READ MORE: What's wrong with the big RIA model, straight from advisors' mouths Grains of salt and kernels of truth With fee compression as a dominant theme of recent decades in investing and a continuing force today, many planners have embraced alternative business models and thought carefully about the ways that clients may fail to understand the full equation or respond to the need to charge higher costs in some cases. Experts (and online commenters) point out there are any number of specific circumstances and statistical criteria that could affect the numeric value of advice, portfolio management and financial planning. That means the existence and range of the numbers matters more than, say, the exact numeric finding that this reporter's final net worth would grow by more than $284,000 by hiring an advisor. Furthermore, the tool includes the relevant legal disclosures and discussions about the methodology, with links for further reading. For advisors and their teams, the important takeaway from such numbers comes from expecting and fielding fee queries from the prospective clients and the large values from the behavioral coaching underlying their advice. In times of volatility, advisors can help clients "have a longer time horizon" and avoid "knee-jerk decisions" that cost them, said Mike Byrnes, the founder of advisory practice growth firm Byrnes Consulting. "Sometimes people are too quick to pull the rug out of their portfolios, so to speak, so they can miss a lot of the upside," Byrnes said. "There's a plan, and they need to stick to it to get to the retirement goals that they want." READ MORE: Solo advisors can thrive in a consolidating industry. Here's how The next iterations The tool could aid advisors in explaining how their comprehensive services deliver more value than the cheaper technology tools that do basic asset management or other competitors who are transactional salespeople. That'll be especially true once registered investment advisory firms and other wealth companies can embed it directly on their websites, DeJohn said. "Some of the feedback we've gotten from advisors is that there's large interest in making somewhat of a B2B version of this," she said. "Firms want to be able to distinguish their own alpha versus other firms."

Commentary: The world of work is much more pleasant than we expected
Commentary: The world of work is much more pleasant than we expected

CNA

time30-05-2025

  • Business
  • CNA

Commentary: The world of work is much more pleasant than we expected

LONDON: There is a market for sweeping economic analyses, generally predicting that the sky is about to fall on our heads. Thomas Malthus arguably started it with his 18th-century prediction that population growth would always run ahead of food production. He was unlucky in having his conjecture picked over for centuries. Normally, economists get away with it. Before reading the IMF's recent long-term prediction of global labour markets, therefore, I felt the need to go back a quarter of a century to see what similar organisations were forecasting. The OECD's 2000 report on 'reforms for an ageing society' is representative of the thinking at the time and its logic remains sound. Baby boomers in middle age would start to retire in the 2000s, it predicted, ensuring that total employment as a proportion of the population would start falling from 2010. This drop would be mitigated by more women working, but overall, the effective working life of someone in an advanced economy would hover around 34 to 35 years. CONTRARY TO PREVIOUS FORECASTS 'The data suggests retirement and active ageing are not yet going hand-in-hand,' the OECD concluded, adding, patronisingly, that evidence showed older people simply spent time on 'more television-watching and sleep'. What nonsense. Even though the world has had its fair share of economic crises since the millennium, the proportion of the population in employment is showing signs of rising rather than falling. An end to shorter male working lives and much higher employment rates among women have also ensured that effective working lives have risen beyond 38 years, far more than expected. Almost everything that the OECD described as a challenge has improved significantly. It is not often that columnists write about what has gone right, so it is worth examining why jobs and lifetime employment have done so much better than previously thought. The OECD might like to claim that these changes were caused by its own warnings, prompting governments to reform labour markets and retirement systems. It is a comforting thought for those working in international organisations, but highly unlikely. In a telling recent study, economists at Goldman Sachs noted there was precious little correlation between longer working lives and changes in official retirement ages in different countries. The trend towards longer working lives has taken place almost regardless of whether governments have undertaken targeted policy reform. LONGER WORKING LIVES Of course, this positive story cannot cover every employee in every workplace. The lower paid often work longer — or retire but then return to the workforce — to have even a basic living standard in retirement. This has been mitigated by the fall in male manual labour, so there are no longer large numbers of men physically unable to do their jobs, and that should persist as long as Donald Trump doesn't get his way with a return to manufacturing roles. The IMF showed increased cognitive faculties of older people over the last 25 years have been the biggest driver of the ability to work longer. As far as our brains are concerned, 70 really is the new 50, it concluded, so these trends can continue. Further efforts to make jobs work for older people can mitigate three-quarters of the projected slowdown in global growth due to ageing in the next 25 years, the IMF predicted. I know this is another bold forecast from economists. But the positivity is new and striking.

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