"Academic and policy researchers have contributed competing narratives as to whether or not professional advice contributes to investor value," write Cynthia Pagliaro, senior research analyst with the Vanguard Center for Investor Research, and Stephen Utkus, director of the program.

"We believe the advisory community needs to build a broad set of measures beyond portfolio outcomes to quantify and report on value to investors. Only when value is clearly defined can debates over value for money be considered," the analysts write in their new research paper, Assessing the Value of Advice.

Portfolio outcomes

The research culls data from Vanguard's Personal Advisor Services, the firm's hybrid advisory program that pairs human and automated approaches, which launched in 2014.

A sample of 44,000 accounts held by investors at or near retirement in the PAS program showed that two-thirds of accounts saw a material change in their overall equity position—at least a 10 percent increase or decrease in allocation—after enrollment.

Nine in 10 increased their exposure to international securities, and 27 percent reduced their cash holdings. Seven in 10 increased the portion of their indexed funds, and 9 percent reduced concentrations in a single stock.

"These results underscore the impact that advice can have on previously self-directed investors, including adjusting portfolio risk-levels, fully investing in fixed income securities rather than in cash reserves, and eliminating home bias. PAS advice also led to a higher passive fund share and substantially reduced or eliminated single-stock risk," the paper says.

Financial outcomes

Comparing the financial outcomes of advised accounts to self-directed accounts depends on how success is calculated.

In its study, Vanguard focused on the goal most commonly identified by its clients in the PAS program: a secure retirement.

Based on data from 100,000 accounts, eight in 10 of Vanguard's PAS clients had an 80 percent or greater probability of achieving a secure retirement. Three-quarters had a 90 percent to 100 percent probability. Eight percent had a 0 percent to 9 percent probability of success.

The high rates of preparedness were encouraging, but could also signal that some savers may be over-preparing, and perhaps living more modestly than necessary in prepping for retirement.

The 20 percent of savers that fell below the 80 percent probability threshold tended to be at or near retirement age and had assets and savings well below what they need to fund their retirement expectations.

Emotional outcomes and the role of the advisor relationship

Can advisors, or services such as Vanguard's PAS program, create emotional security for retirement investors?

The paper defines that subjective psychological measure by gauging investors' trust and confidence in advisors. It also attempts to calculate the sense of accomplishment investors have in preparing for retirement goals, as well as the literal emotional support advisors give during market shocks or personal battles investors face—think job loss or a death in the family.

Based on a survey of 24 questions put to 504 PAS investors of varying demographics, Vanguard found the answers that related to the emotional element of an advisor's role accounted for 45 percent of the investors' perceived value. The hard services—portfolio management and financial planning—accounted for 55 percent of the perceived value.

"Our results highlight the need for a broader advisory industry investment in value metrics," write Pagliaro and Utkus.

"Assessing value for money for the investor must begin with a comprehensive measure of value. As the industry grows in scale and impact and the emphasis on investor value continues, additional data-driven benchmarks will be needed to evaluate advisor quality and efficacy," they add.

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