What do advisors do anyway?

6 min read
Insights
Feb 24, 2019

Ever wondered just what a financial advisor is supposed to do for you?

Here are six roles that financial advisors and brokers have historically played for their clients and how Farther is different:

Product Sales

This is anything commission-based – Historically, brokers and advisors earned commissions from product sales or revenue sharing arrangements with fund companies. Both of these practices are too often a way for advisors to generate revenue for themselves, instead of generating wealth for their clients. Even worse, many of these fees are hidden within the expense ratios of mutual funds or buried in complex, hard to understand marketing collateral. There’s NO place for fund and investment product commissions at Farther.

Investment Research

This is stock or mutual fund picking – Most advisors aren’t doing their own independent research into stocks or mutual funds anymore. Instead, they rely on a handful of big banks that can support teams of people to deeply research companies and fund managers and publish their findings. While many advisors and mutual fund managers still pick winners and losers based on that research, they’ve been shown to underperform the market as a whole when you consider their fees for doing so. Investors end up with less return for all that work. From Farther’s perspective, we believe you might as well keep the fees you would have paid for lower returns in your own pocket.

Asset Allocation

This is portfolio construction – What types of investments you own will be the single most important contributor to your returns. It is critically important to get right. That’s why we partner with some of the largest and most trusted wealth managers for their expertise. Farther implements that expertise in your account to provide the right mix of diversified investments for your goals.

Financial Planning

Financial planning typically involves taking stock of your current financial state by printing out statements, adding up accounts in glorified excel spreadsheets, and creating a static plan full of lots of stats and charts that are looked at once before being put on a shelf because they’re obsolete the minute they’re created. We take a different path. Farther’s goal is to give you straightforward explanations and concrete steps to take whenever you need it, giving you a plan that changes as often as your accounts do.

Counseling

According to Vanguard, investors with an advisor outperform those without one by 3%. The main reason for that is that good advisors soothe worries and protect portfolios from bad decisions in down markets (i.e. selling when the market is low) and from irrational exuberance in up markets (i.e. over-investing in risky assets when the market is high). Farther does this for you automatically, keeping your assets appropriately invested in up and down markets and providing proactive suggestions when we see issues.

Social Network

Some charismatic advisors are better characterized as very expensive golfing buddies who provide the occasional access to firm-wide parties. We’re not here to offer tips on your swing, but we’re not opposed to the occasional social gathering. More to come on that another time…

Sources: Vanguard

Taylor Matthews

Co-Founder and CEO @ Farther

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