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  3. Is an Investment Advisor Really Worth the Investment Advisory Fee?

Is an Investment Advisor Really Worth the Investment Advisory Fee?

Submitted by Davenport Watts & Drake Investment Advisors, LLC on November 15th, 2016

 

Numerous surveys indicate an increasing number of high net worth investors are willing to pay for solid, unbiased, fee-only investment advice.  This is not surprising given the challenges of today’s markets.  On the other hand, a number of investors prefer to go it alone, thinking they can do better on their own or that investment advice is not worth the cost.

With the average fee charged by an investment advisor around 1%, some investors question whether the advice they receive actually amounts to a 1% advantage in their performance.  In other words, do you feel the advice you receive adds at least 1% to the value of your portfolio?  While this is a fair question, perhaps it is a difficult one to quantify.  Why?  Because a good investment advisor does much more than just pick investments that have and will perform well.

  • A good investment advisor has an understanding of the market as a whole and will properly diversify your portfolio to decrease downside exposure and withstand increased volatility.  A well-diversified portfolio will likely decline much less than the overall stock market, and so recover that 1% cost many times over.
  • A good investment advisor will keep you focused on your broad long-term objectives rather than narrowly focusing on the day-to-day market shifts that have no real impact on the overall performance of your portfolio.
  • A good investment advisor will help you avoid the common traps investors fall into such as trying to time the market or chasing the latest high performer.  These mistakes are often costly to investors making their way alone.
  • A good investment advisor will always have your best interests and long-term objectives in mind, saving you the time, energy and worry of trying to manage your portfolio on your own.

An honest evaluation of an investment advisor’s impact would concentrate as much on the losses to be avoided in the tough times as it would the gains to be captured when the markets are rallying.  Everyone looks good riding the high tide, but what about when the tide retreats?  To quote Warren Buffet “Only when the tide goes out do you discover who’s been swimming naked.”  Could you use an investment advisor to help you in these ways?

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Davenport Watts & Drake Investment Advisors, LLC (DWD) is a Registered Investment Adviser, duly registered with the State of Mississippi in accordance and compliance with applicable securities laws and regulations.  In that the firm may only transact business in states in which it is properly registered as an independent advisor or in which it is exempted or excluded from the registration requirement, only residents of the State of Mississippi and those states with an established de minimis rule may receive investment advisory support services accordingly from DWD.  DWD does not render personalized investment advice over the internet.  In no event shall the presence of this website on the internet be interpreted or construed as a solicitation to provide investment advisory services outside of the State of Mississippi or outside of those states with an established de minimis rule regulating the sole and exclusive jurisdiction in which DWD is registered as an investment adviser.  In the future, should DWD seek to solicit investment advisory clients in states outside of the State of Mississippi or outside of those states with an established de minimis rule, an investment advisor registration would first be procured by the firm in such state or states outside of the State of Mississippi or those states with an established de minimis rule. 

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