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May 2021

Measuring the Value of a Financial Professional

By Uncategorized

What is a relationship with a financial professional worth to an investor? A 2019 study by Vanguard, one of the world’s largest money managers, attempted to answer that question.  

Vanguard’s whitepaper, concluded that when an investor works with a professional and receives that level of investment advice, they may see a net portfolio return about 3% higher over time.1 

How did this study arrive at that conclusion? By comparing self-directed investor accounts to a this model, Vanguard found that the potential return relative to the average investor experience was higher for individuals who had financial professionals.1

Vanguard analyzed three key services that a professional may provide: portfolio construction, wealth management, and behavioral coaching. It estimated that portfolio construction advice (e.g., asset allocation, asset location) could add up to 1.2% in additional return, while wealth management (e.g., rebalancing, drawdown strategies) may contribute over 1% in additional return.1

Asset allocation is an approach to help manage investment risk. Asset allocation does not guarantee against investment loss.

The biggest opportunity to add value was in behavioral coaching, which was estimated to be worth about 1.5% in additional return. Financial professionals can use their insight to guide clients away from poor decisions, such as accepting excessive risk in a portfolio. Indeed, the greatest value of a financial professional may be in helping individuals adhere to an agreed-upon financial and investment strategy.1

Of course, financial professionals can account for additional value not studied by Vanguard, such as helping clients implement wealth management strategies, which may help protect against the financial consequences of loss of income, and coordinating with other financial professionals on tax management and estate strategies.         

After years of working with a financial advisor, the value of a relationship may be measured in both tangible and intangible ways. Many such investors are grateful they are not “going it alone.”

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This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Investment advice offered through American Wealth Management (“AWM”), a SEC-registered investment adviser. Certain personnel of AWM may also be registered representatives of M.S. Howells & Co. (“MSH”), Member FINRA/SIPC, a registered broker-dealer, and therefore, may offer securities through MSH. AWM and MSH are not affiliated entities.

Citations

1. Advisors.vanguard.com/iwe/pdf/ISGQVAA.pdf [2/19]

IRA deadline

IRA Deadlines are Approaching: Here is What You Need to Know

By Uncategorized

Financially, many of us associate the spring with taxes – but we should also associate December with important IRA deadlines. This year, like 2020, will see a few changes and distinctions.

December 31, 2021, is the deadline to take your Required Minimum Distribution (RMD) from certain individual retirement accounts.

May 17, 2021, is the deadline for making 2020 annual contributions to a traditional IRA, Roth IRA, and certain other retirement accounts. This extension from the traditional April 15 deadline follows an extension of the traditional tax deadlines.1

Some people may not realize when they can make their IRA contribution. You can make a yearly IRA contribution between January 1 of the current year and April 15 of the next year. Accordingly, you can make your IRA contribution for 2021 any time from January 1, 2021 to April 15, 2022.2

Thanks to the SECURE Act, a person can open or contribute to a Traditional IRA past age 70½ as long as they have taxable income.

If you are making a 2021 IRA contribution in early 2022, you must tell the investment company hosting the IRA account for which year you are contributing. If you fail to indicate the tax year that the contribution applies to, the custodian firm may make a default assumption that the contribution is for the current year (and note exactly that to the I.R.S.).

So, write “2022 IRA contribution” or “2021 IRA contribution,” as applicable, in the memo area of your check, plainly and simply. Be sure to write your account number on the check. If you make your contribution electronically, double-check that these details are communicated.

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This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Investment advice offered through American Wealth Management (“AWM”), a SEC-registered investment adviser. Certain personnel of AWM may also be registered representatives of M.S. Howells & Co. (“MSH”), Member FINRA/SIPC, a registered broker-dealer, and therefore, may offer securities through MSH. AWM and MSH are not affiliated entities.

Citations

1. Irs.gov, March 29, 2021
2. Irs.gov, November 10, 2020