Vanguard Advisor’s Alpha: Clients and their advisors thriving together for 25 years

Over the past 25 years, the partnership between the investment advisory community and Vanguard has steadily grown stronger. This relationship owes its strength in no small part to advisors’ widespread adoption of the Vanguard Advisor’s Alpha framework.

The result: A significant transformation in how advisory portfolios are managed—namely, a heightened focus on asset allocation and investment fund selection, financial planning and wealth management, and behavioral coaching, resulting in better outcomes for advised clients and advisory practices alike.

A new paper from the Vanguard Investment Advisory Research Center recounts this journey:  Celebrating Vanguard Advisor’s Alpha: Clients and their advisors thriving together for 25 years provides context for a number of advisory trends that have benefited advice practitioners and their clients. It details how regulatory changes, fee structures, and technology-enabled competition (i.e., robo-advisors) shaped and continue to shape the contours of the industry and mold client satisfaction.

Building on the format of previous entries in the Advisor’s Alpha series, this edition once again identifies and quantifies key activities through which advisors can add value to client returns, over and beyond those the clients might be able to achieve without expert guidance. Celebrating Advisor’s Alpha adds an activity, or module—the potentially tax-optimizing strategy of tax-loss harvesting. The authors note that while tax-loss harvesting is not new to the industry, in recent years, technology has enabled this once paper-driven strategy to become digitized and thus more scalable, applicable, and cost effective.

In addition to reviewing the industry’s progress, the paper looks toward the future, forecasting a more democratized advisory landscape in which more investors will have access to high-quality financial advice. Vanguard expects ongoing technological advancements to further reduce friction costs, making a wider range of financial planning, tax, and estate planning and individualized proxy preference services accessible to a broader audience. This will enable significantly more advised clients, and their advisors, to benefit from wealth management strategies and individual preferences that were previously more exclusive to ultra-high-net-worth individuals.

Note:

All investing is subject to risk, including possible loss of principal.

Tax-loss harvesting involves certain risks, including, among others, the risk that the new investment could have higher costs than the original investment and could introduce portfolio tracking error into your accounts. There may also be unintended tax implications. We recommend that you carefully review the terms of the consent and consult a tax professional before taking action.