Calculating the Value of Financial Advice

How to calculate the benefits of financial planning and working with a financial advisor

Investing in professional financial advice can be a crucial investment in your financial future. A knowledgeable advisor can offer you expert guidance, personalized strategies, and support to help you manage your wealth and work towards your financial goals with clarity and confidence.

Research studies have shown that individuals who seek professional advice tend to experience better financial outcomes, including increased savings, optimized returns, and a more secure retirement. The value of financial advice can lead to significant improvements in your overall financial well-being.

Although calculating the value of financial advice on long-term net worth may vary depending on individual circumstances, market conditions, and strategy effectiveness, comprehensive planning can significantly enhance various aspects of your financial life.

Calculating the Value of Financial Advice​

Calculating the Value of Financial Advice

Details on Potential Economic Benefits

Cash Flow and Budget Planning can significantly improve savings rates, but percentage increases in net worth or income are highly individualized.

  • Some estimates suggest that effective cash flow management could potentially increase savings by 10-20% of annual income, depending on the client's baseline financial behavior.

Research suggests that goal-oriented financial planning can lead to better financial outcomes, with individuals with clear financial goals more likely to save more money, invest more wisely, and feel more confident about their financial future.

  • Estimates might suggest improvements in net worth accumulation or annual savings rates by 10-25%, depending on the individual's adherence to their financial goals and the strategies employed to achieve them.

Estimates vary widely, with some research suggesting that strategic tax planning can reduce a client's tax liability by 10-30%, depending on the complexity of their financial situation and the tax strategies employed.

The Vanguard Group, in a study titled "Putting a value on your value: Quantifying Vanguard Advisor's Alpha," suggests that investment planning and advice can add about 3% in net returns over time, though this is not guaranteed and can fluctuate based on market conditions and investment choices.

Additional economic benefits quantified:

  • Investment selection 0.45%-0.82%
  • Tax loss harvesting 0.20%-0.60%
  • Asset Location up to 0.75%
  • Rebalancing 0.35%-0.44%

Quantifying the benefit of retirement planning is challenging due to the long-term nature of the strategy and dependency on investment returns and savings rates.

  • Optimization of retirement savings and income strategies could potentially increase retirement income by 20-40%, as suggested by various retirement planning tools and studies.
  • Retirement portfolio tax strategies and withdrawal sourcing 0.50%-0.70%

The direct financial impact of insurance planning is difficult to quantify in terms of net worth or income increases, as its primary value is in risk mitigation and financial protection. 

  • Optimizing insurance coverage can have an economic impact in the hundreds or thousands of dollars a year, and the potential elimination of catastrophic loss is priceless.
  • The qualitative value of peace of mind and financial security is significant, though not easily measured in percentage terms.

Research by Morningstar, Inc., titled "The Value of Advice: Assessing the Role of Emotions," suggests that behavioral coaching and decision-making improvements can add about 1.5% to 2.25% in relative return for investors, primarily by avoiding poor timing and investment decisions.

Disclaimer: The calculator is designed to be educational and illustrative. While we strive for accuracy, the results are based on the information you provide and include hypothetical scenarios and estimates. These calculations can vary significantly due to the highly individualized nature of each person’s financial situation. Quantifying certain economic benefits is challenging because financial strategies are long-term and depend on factors such as investment returns and savings rates, which fluctuate over time. The calculator’s results should not be considered personalized financial advice or a guarantee of future performance. Actual results will vary based on your specific financial situation, market conditions, and other factors that impact financial planning. This calculator is not a substitute for a comprehensive financial planning process. Before making any decisions based on the calculator’s results, we strongly recommend having a detailed discussion with a qualified financial advisor who can take into account your unique circumstances and give you personalized guidance. Able Wealth Management cannot guarantee the calculator’s results’ accuracy, appropriateness, or completeness. All examples are hypothetical, and past performance does not guarantee future returns. By using this calculator, you acknowledge that Able Wealth Management is not liable for any decisions made based on the calculator’s output. Calculating the Value of Financial Advice is purely for educational purposes only.

Schedule an appointment

Volatility Drag

Volatility drag, often unnoticed by many investors, plays a significant role in the performance of investment portfolios, especially in markets characterized by high volatility. Understanding volatility drag is crucial for making informed investment decisions and managing long-term investment performance.

Understanding Volatility Drag

Volatility drag refers to the negative effect of investment volatility on compound returns over time. It occurs because losses have a more significant impact on portfolio value than gains of the same magnitude. For example, if an investment loses 10% one year and gains 10% the next, the investment will not return to its starting value due to the mathematical asymmetry between gains and losses. This phenomenon underscores the importance of minimizing large fluctuations in investment value to protect long-term returns.

The Mathematics Behind Volatility Drag

The mathematical principle underlying volatility drag is relatively straightforward but profound in its implications for investors. The key concept is that percentage gains and losses are not symmetrical. A 50% loss requires a 100% gain to break even, not a 50% gain. This asymmetry means that volatility (up and down movements in price) can erode the compound growth rate of an investment, even if the arithmetic mean of the returns seems healthy.

Example of Volatility Drag

Consider an investment with the following annual returns: +20%, -15%, +10%, and -5%. While the arithmetic mean of these returns might suggest a modest positive performance, the compound annual growth rate (CAGR) would tell a different story, factoring in the volatility drag and showing a lower effective return than the arithmetic mean would suggest.

Implications for Investors

  • Risk Management: Understanding volatility drag emphasizes the importance of risk management strategies, such as diversification and the use of derivatives for hedging, to minimize significant downturns in portfolio value.
  • Investment Strategy: Investors might consider investment strategies that aim for steady, consistent returns over those with potentially higher but more volatile returns. Such strategies might include investing in low-volatility stocks, index funds, or using dollar-cost averaging to mitigate the impact of market fluctuations.
  • Psychological Aspects: Volatility drag also highlights the psychological challenge for investors who may overreact to short-term market movements. A long-term perspective is crucial for successful investing, as frequent trading in response to volatility can exacerbate the drag on returns.
  • Performance Evaluation: When assessing investment performance, considering both the arithmetic mean return and the compound annual growth rate (CAGR) can provide a more comprehensive view of an investment’s performance, factoring in the effect of volatility.

Financial Planning Fees












  • Fees can be paid monthly, quarterly or semi annually
  • Actual fee will be determined on complexity and scope after an initial consultation
Investment Advisory Fees


Fee Rate: %


Annual Fee: $

  • Fee charged on a percentage-tiered rate
  • Fee based on total assets managed
  • Fee covers services such as portfolio design, continuous monitoring, rebalancing, and personalized guidance

Join Our Mailing List