Vanguard published a report that shows financial advisors can add value worth about 3% per year in extra returns to an investor’s portfolio. Suppose it’s true, how should the investor and the advisor split this 3%? Should it be 50:50 — the investor keeps 1.5% and pays 1.5% fee to the advisor? Should it be 2:1 — the investor enjoys 2% extra return after paying 1% fee to the advisor? How else?
I answered this question at the new microsite dedicated to my financial advisor search and screening service. Please read Advisor’s Alpha Belongs To The Investor at Advice-Only Financial.