What Does My Financial Advisor Do All Day?

What Does My Financial Advisor Do All Day… and Am I Getting What I Pay For?

Have you ever wondered what a financial advisor really does all day-and whether the fee is worth it? Just today, while working with our newest team member, Payton, and reviewing the list of tasks we needed to complete for a particular client ahead of a review meeting, we couldn’t help but laugh at how much actually goes into working with a client. The list is long!

I’ve often been asked, “What exactly do you do all day?” Many people assume that advisors sit around waiting for clients to call — to place trades, request withdrawals, or ask for tax forms. But the reality is far more involved.

I frequently hear financial “experts” — podcasters and journalists alike — question the value of paying an advisor an annual fee. They argue, “Why not just throw your money into an S&P 500 index fund, set it, and forget it?” And to be fair, there are a few people who truly have the discipline, knowledge, skills, and self-control to manage their finances that way. But that’s just it — only a few. Even I rely on my colleagues to help me make important financial decisions, and I deeply value their feedback.

The True Value of Advice

At Ranch Capital Advisors, our management fees are competitive and fully transparent, ensuring clients know exactly what they’re paying for. In fact, the exact dollar amount is even listed on our clients’ individual performance reports. I can confidently say that the value we provide is significant — especially when it comes to managing investor behavior and helping clients avoid emotionally driven, impulsive decisions.

Consider these findings:

• Vanguard’s Advisors Alpha study estimates that working with a financial advisor adds, on average, about 3% in net annual returns, largely due to behavioral coaching. 

• Studies by Morningstar and Vanguard show similar results. 

  
  

But investment management is only part of the equation. Equally — if not more — important is financial planning.

Beyond Investment Management: Financial Planning

Financial planning is the process of creating a comprehensive strategy to manage your money and achieve your goals. It gives investors clarity, confidence, and control over their financial future by aligning their investments, spending, and savings with their long-term objectives. 

At Ranch Capital, our financial planning process involves a holistic review of every aspect of our client’s financial lives. We track and review all our clients’ holdings and investments, even if they are not under our active management umbrella. That is an important part of financial planning. And research shows that the value-add from financial planning can be even greater:

• A 2022 Russell Investments study estimated that advisory services such as rebalancing, behavioral coaching, customized tax planning, and financial planning added about 4.91% in value (though this isn’t explicitly phrased as an annual return percentage). (Link to Gerald Edelman article)

• Morningstar suggests that retirees could generate about 29% more income through better planning (this refers to income, not directly to annual portfolio returns). 

• Industry sources cite a typical range of 1.5% to 4% added to portfolio growth annually through professional advice. 

Are You Getting What You Pay For?

However, not all advisory relationships deliver this level of value. We’ve met many prospective clients who say they never hear from their advisor — and certainly don’t receive any financial planning services — despite paying a management fee.

If you’re not regularly meeting with your advisor to review performance, discuss taxes, revisit short-, medium-, and long-term goals, evaluate investment strategies, and talk through major financial decisions, you might be paying too much.

One prospective client once mentioned that their advisor sends them a nice bottle of wine every Christmas. But when we reviewed their portfolio, the results were disappointing: performance was subpar, their money market returns were a quarter of what they should have been, and their investment strategy consisted of just a couple of index funds — with no financial planning at all. 

That’s an awfully expensive bottle of “free” wine.

If your advisor isn’t adding measurable value beyond holiday gifts, it’s time to reevaluate the relationship.