Historically, financial advice was often centred on products and transactions. Advisers would recommend funds, switches or investment ideas, with success commonly judged by whether those choices delivered higher returns than the market.
Much of this approach revolved around identifying so-called “alpha” opportunities. In simple terms, alpha means outperforming the market. Advisers would analyse past performance and manager track records in the hope of finding funds that might continue to deliver above-average returns. The difficulty is that this relies heavily on prediction. Markets evolve, managers change and evidence shows that consistently outperforming the market after costs is extremely difficult.
The role of the financial adviser has therefore changed significantly over the last few years to have a bigger focus on good financial planning. Today, good financial planning is far less about trying to outguess markets and far more about helping clients make better decisions across their finances through a series of sensible, repeatable actions that together can materially improve long-term outcomes.
As someone who values data and evidence, I found Vanguard’s report exploring how the value added by advisers can be measured particularly compelling. Rather than focusing on fund manager “alpha”, the research seeks to quantify “adviser alpha” – in other words, the value added by working with a financial adviser. It highlights measurable ways in which good financial planning and better decision-making can improve outcomes over time through the following:
- Choosing a suitable asset mix at the outset
- Using low-cost investments
- Helping clients make better decisions in difficult markets
- Planning tax-efficient retirement withdrawals
Choosing a suitable asset mix at the outset
Asset allocation decides how money is split between different asset classes such as cash, bonds and shares and is one of the most important drivers of long-term outcomes. Vanguard’s research shows this decision has far more impact than the actual fund selection alone.
While asset allocation is highly personal and not easily reduced to a single number, Vanguard considers it a significant source of value compared with the average investor, particularly when portfolios are built around clear goals and timeframes rather than market forecasts.
Using low-cost investments
Vanguard found that investment selection within the asset allocation can add up to 1% a year compared with an average experience, primarily by moving away from higher-cost funds.
This improvement comes simply from paying lower charges. Costs are one of the few variables investors can control, and even small savings compound meaningfully over time. Paying less means keeping more of the return earned, regardless of market conditions.
Helping clients make better decisions in difficult markets
One of the largest potential sources of adviser value comes from helping clients avoid poor decisions during periods of market stress. Most investors are aware of the long-term nature of investments and that there will be bumps along the road. However, the hard part is sticking to them in the best and worst of times and not being influenced by external noise.
Vanguard estimates that helping investors stay invested and avoid emotional decisions can add up to 2% a year or more compared with the average investor experience. In extreme periods, a single decision can outweigh years of fees.
Planning tax-efficient retirement withdrawals
In retirement, using a tax-efficient withdrawal strategy can add up to 1.12% a year, purely by changing the order in which pensions, ISAs and other investments are used. This value is entirely planning-led and does not involve higher investment risk. The outcome of this would be increasing clients’ wealth and the longevity of portfolios.
Bringing the value together
Taken as a whole, Vanguard’s research suggests that advisers who focus on these areas can improve outcomes by up to, or even exceeding, 3% in net returns, relative to a non-advised individual.
At Wingate Financial Planning, we don’t focus on beating the market. Instead, we focus on the controllables: helping clients make better decisions, reducing avoidable costs and risks, and planning more effectively across their lifetime. Over time, those improvements can add up to a meaningful difference.
If you’d like to explore whether financial advice could benefit you, an initial conversation is often the best place to start.
Source: Vanguard Advisory Research Centre: Quantifying Adviser’s Alpha® in the UK (June 2025)
