At JNBA, we’re confident that one of the major reasons our independent fee-only firm has thrived over the past four decades is the value we provide to our clients.
We are dedicated to being our clients’ irreplaceable partners — since we started tracking in 2001, we’ve earned a 97% client retention rate. And we’re continually striving to improve and deliver even greater value.
Over the course of the last year, JNBA took an in-depth look at the many ways a financial advisor can bring value to a client relationship through a series of five blog posts. What does the data say about how working with a financial advisor can help individuals and families achieve their goals, and what has JNBA found over our 43-year history? We covered everything from the guidance an advisor provides and portfolio construction to withdrawal strategies and financial life planning, including several data-driven studies. We wrapped up the series in the spring with a fictionalized case study that demonstrated how all of those elements could come together to create value that’s greater than the sum of its parts.
Since then, Russell Investments took a look back at 2020 to put an even finer point on the value advisors provide. This summer it released a study that determined that, in 2021, advisors have an estimated contributory value of 4.83 percent. Assuming that many advisors typically charge 1 percent in fees (like we do at JNBA at $1M of investible assets), that’s almost a five-fold return on investment.
Here’s how the Russell Investments study broke it down, in five categories:
Behavioral coaching provides the largest value, at 2.02%. Given 2020’s volatility, it’s not surprising that the biggest contributor to advisor value is our role as a behavioral coach, helping clients stick to their financial plan and avoid emotional decisions. A Vanguard study we cited in our post on the value of guidance and confidence shows that advisors can help clients add 1.5% in returns over time by removing these emotional decisions. Our job is to help clients stay on track and weather the storm.
Tax-smart planning and investing contributes 1.20%. We believe that taxes should be an important consideration, and we employ many “tax levers” on behalf of our clients. Some tax-management techniques include deferring the realization of capital gains, managing the holding period to avoid short-term capital gains, harvesting losses, as well as other options like tilting away from dividend-paying stocks in taxable accounts and paying attention to individual tax lots.
Customized planning delivers 0.82%. At JNBA, we believe in being an advocate in all matters of your financial life and strive to deliver even greater value than what is easily quantified. Whether it’s charting a course for upcoming milestones, helping to optimize the timing of executive compensation such as options or restricted share grants, reviewing property and casualty insurance, or creating an education savings plan for your kids, we feel it is important to be a trusted resource for your entire financial life. “Often, this means being a sounding board as you navigate tough decisions or transitions in your life that do not initially appear to be financial in nature,” says JNBA Advisory Services Manager Elise Huston.
Product alignment adds 0.62%. JNBA embraces the concept that our clients should never wonder on whose side is their investment advisor. Throughout strategy development, implementation, and ongoing management, every aspect of our investment process is driven by independence. As an independent Registered Investment Advisor (RIA), we provide conflict-free advice and don’t earn commissions for recommending investments, which means our Investment Committee can focus on research and analysis that only has the client in mind when it comes to wealth management: long-term goals, client values, complex needs, tax planning, multi-generational planning, philanthropic activity, and more.
Finally, active rebalancing of investment portfolios provides a value of 0.17%. The backbone of JNBA’s strategy implementation is Intelligent Rebalancing, an institutional caliber tool that allows us to efficiently and effectively monitor and trade portfolios. “The JNBA Investment Committee adheres to a systematic rebalancing approach to review portfolios every 10 business days through a disciplined process designed to reduce risk and increase return,” says JNBA Director of Investment Management David Webb. The JNBA Investment Committee leverages this system to review portfolios every 10 business days through a rigorous dual approval process — a systematic approach that creates an opportunity to reduce risk and increase return.
This study reinforces that most investors continue to realize multiple tangible benefits when they have a skilled advisory team in their corner. We’re proud to play that role for our clients. With our highly personalized and integrated wealth management expertise, fierce commitment to independence, and advice driven by advocacy® approach, JNBA works every day to demonstrate the value our clients deserve.
Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from JNBA Financial Advisors, LLC.
Please see important disclosure information at www.jnba.com/disclosure.