Michael DiJoseph is senior strategist in the Investment Advisory Research Center at Vanguard. He is a Certified Financial Analyst and volunteers as a member and secretary on the Board of Trustees at the Province of St. Thomas of Villanova Support Fund. Michael joins Jared Siegel to discuss the value of an advisor.

Tune in here, at delapcpa.com/podcast, or wherever you listen to podcasts:

Here are a few highlights from Jared's conversation with Michael DiJoseph:

  • Vanguard Advisor’s Alpha found that advisors adhering to a holistic wealth management framework could add about 3% per year in annualized returns relative to the average experience.
  • “We’re bad at forecasting the future because the future is simply not forecastable,” Michael says.
  • Vanguard keeps updating its study about quantifying the value of an advisor because they “want to start talking to people in their language.” They aim to help both advisors and customers understand the value of this service.
  • Warren Buffet was a stock picker and active manager, but he looked at the numbers and drew the conclusion that most managers don't earn their fee, and much significant wealth is dissipated as a result of chasing a prediction-based approach to performance.
  • Being as proactive as possible is always an advantage, but there are times when that’s not the case — there is a time and a place to respond to anticipated things, Jared shares. Michael describes the reactive model within the Advisor's Alpha framework.
  • “Staying the course doesn’t mean standing still,” Michael tells Jared. Staying the course actually requires an enormous amount of minor course corrections along the way. You don't just get on a boat and suddenly arrive at your destination by doing nothing.
  • Roth conversion effectively means you can accelerate the taxes on your tax-deferred money and convert it into tax-free money so that you won't have to pay it later, Michael explains. In an economic downturn, “the account value might be down; an individual's income might be down… Take advantage of that and accelerate taxes when the rate is lower — it might be higher in the future; use those losses to get a little creative.”
  • “There’s a lot of noise out there around millennials and Gen Z not being as good as investors… I actually think it's the opposite. I think they've had a huge head start, and I think we're going to start seeing the benefits of better advice all around,” Michael says.