Invest Well. Live Well: Do it yourself or with an advisor?

The best athletes in the world use coaches to help keep them on track, maintain focus, monitor progress and achieve their goals. Despite being incredibly talented, athletes realize the value a coach brings to them personally and/or their team.

We like to say we are like your personal chief financial officer, reviewing aspects of your wealth and providing personalized advice to help achieve what truly matters to you. There have been several compelling studies showing that working with a trusted financial advisor can help build wealth faster.

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The August 2016 report from the Center for Interuniversity Research and Analysis Organizations showed investors receiving advice accumulate 290 per cent more wealth after 15 years than non-advised investors. To put in another way, it could take 34 years to amass the same amount of wealth by going at it alone.

A June 2015 study by Vanguard Investments showed that advisors may add approximately three per cent of value in portfolio returns over time. Theses returns were net of both fees and taxes. The Vanguard study mentions the range of around three per cent because not all advisors offer all of these services.

A breakout of where we believe advisors can help improve results:

Invest Well

1. Portfolio construction: Includes suitable asset allocation, a mix of stocks, bonds and alternatives. Employing seven layers of diversification (geography, currency, style, etc.). Using cost-effective solutions and placing each investment in the most tax efficient account (RSP, RESP, TFSA, etc.).

2. Wealth management: Includes regular portfolio rebalancing. Think trim at highs and add near lows. Creating a draw down or cash flow strategy. To help keep clients on track, advisors should be revisiting client's objectives before major life events such as: having a child, marriage, divorce, retirement, disability, illness or death.

3. Behavioural coaching: Advisors are supposed to help you through challenging times by acting like an emotional circuit breaker to avoid hindering your wealth. One of the biggest risks to investing is doing the wrong thing at the wrong time: selling when markets are down or chasing performance.

The study concluded the most important skill an advisor can bring is behavioural coaching. This coincides with studies from Dalbar that have shown that the average investor underperforms due to emotional behaviour working against them.

In a 2017 study, Dalbar research showed that over a 20 year period a portfolio of 60 per cent stocks and 40 per cent bonds returned an average of 6.4 per cent, but the average investor only earned 2.6 per cent because they tend to make emotional decisions when markets lurch up and down.

On top of potential increased return, according to FP Canada, investors working with advisors feel twice as prepared for retirement as those without. These investors also reported higher levels of emotional, financial and overall contentment.

Financial concepts are complex and continually changing along with stock markets and demographics needs. Some key areas not covered in any of the research were the benefits of pension selection, charitable giving, income splitting and estate planning strategies. Savings in these areas could magnify the results, but are likely harder to quantify.

The studies concluded that provided the advisor charged a reasonable fee, the benefits from the guidance of a full-service professional wealth manager should outweigh the costs.

Until next time, invest Well. Live Well.

This document was prepared by Eric Davis, vice-president, portfolio manager and investment advisor, and Keith Davis, investment advisor, for informational purposes only and is subject to change. The contents of this document are not endorsed by TD Wealth Private Investment Advice, a division of TD Waterhouse Canada Inc.-Member of the Canadian Investor Protection Fund. All insurance products and services are offered by life licensed advisors of TD Waterhouse Insurance Services Inc., a member of TD Bank Group. For more information, call 250-314-5124 or email

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