You know you add value...

As an adviser, you know the value you add to your clients’ financial health. But do you always target your efforts to the areas clients most appreciate? And do you always know how best to explain what you do?

Drawing on years of in-depth research, Vanguard's Adviser’s Alpha breaks out the seven critical benefits that advisers offer clients.

Asset allocation is key to investment success

Strategic asset allocation is the most important driver of long-term performance. It is fundamental to investment success and therefore to Adviser’s Alpha. It is not about maximising returns. The essence of asset allocation is to make use of the long-term characteristics of financial markets to fulfil a client’s life goals.

Points for client discussions

  • Asset allocation means the choice of assets, or financial markets, in which we invest. For example, should we invest in shares of companies or would we be better off with bonds, which pay interest? Should we invest in the UK or China?
  • Experience shows that the great majority of investment returns comes from the big decisions, shares or bonds, China or the UK. Making the right choice is critical.
  • A curious characteristic of financial markets is that they tend to be noisy and unpredictable day to day. There is a lot of news and prices jump around. It is a confusing place. Over the long term, by contrast, market behaviour is surprisingly consistent.
  • Good asset allocation does not seek to maximise returns. The art of asset allocation is to create a portfolio likely to fulfil an investor’s life goals, using the known long-term behaviour of financial markets.
  • The portfolio should reflect an investor’s willingness to take more or less risk to achieve the returns needed to meet their goals.

The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.