I have always held the view that the greatest value provided by quality Investment Advisors to their clients is the stewardship of their wealth. In other words, the accumulation of wealth requires patience, perseverance and hard work; Because of this, investors don’t want to create their wealth twice! This applies to all types of investors whether family or institutional client such as pensions, foundations & endowments. As a result, such stewardship has much more to do with acting as a fiduciary for clients than it does about trying to beat the market or find the next hot investment sector…….strategies, which many times in my experience, can impair wealth more than enhance it.
An article by Vanguard titled, Advisor’s Alpha, puts forth the view that the alpha that Advisors provide to their investor clients should not be considered to be their ability to beat the market indices but in the experience & stewardship that they provide to clients in the relationship. According to this article, the traditional value proposition for many Advisors has been based on their investment acumen and their prospects for delivering better returns than those of the markets. No matter how skilled the Advisor, the path to better investment results may not lie with the ability to pick investments or strategies.
According to the Vanguard article, instead, Advisors should consider a new value proposition based on alternative skills and expertise: that is, they should act as wealth managers and behavioral coaches, providing discipline and experience to investors who need it.
To view the Vanguard article, click here.