Good morning, good afternoon, good evening. Depending on the part of the world you’re in. This is Jonathan Satovsky of Satovsky Asset Management and on today’s episode of “Seeking Wisdom, Wealth, and Wellness,” I want to talk about a concept called Vanguard’s Advisor’s Alpha.
Now, why is this important? Vanguard conducted a study on the value that an advisor provides to their clients—estimating it at three percent per year. And you don’t have to even make assumptions about the anxiety-provoking concept of, “What is the market going to do today, tomorrow, next week, next month, next year.” If you’re planning for a lifetime, you have to create a structure that can insulate someone for a long period of time and focus on controlling the controllable, according to the Vanguard Advisor’s Alpha study.
So the material areas which created value, 77 basis points, almost over three-quarters of a percent, just from tax lost harvesting alone, let me say that again, three-quarters of a percent a year from ongoing tax-loss harvesting alone. Another quarter of a percent of value is provided from rebalancing proactively—rebalancing into dislocated assets. And half a percent a year on asset location; making sure that tax-inefficient assets are in qualified tax-deferred accounts and others are in non-qualified or taxable accounts. Then lastly, a percent and a half, one and a half percent a year, by just convincing someone to stay on their path for not just days, but years, and decades.
So three percent a year can be attributed to behavior, tax-loss harvesting, rebalance, and asset location without making any assumptions about where the market’s going in the future.
Consider that on your path to Wisdom, Wealth, and Wellness, and execute your way to abundance.