Quick Quiz: What do you think I feel is the most important role as an advisor with my clients?

1. Financial Planning
2. Behavioral Coaching
3. Investment Management
4. Resource Due Diligence

I’ll answer below but let me provide some insights first. A study by Russell Investments calculated the potential value of a financial advisor at 5.12% annually before fees. When thinking about whether to do things on your own or partnering up with a financial advisor it would certainly be beneficial to think about the potential long term wealth benefits for you and your family with say a net 4% annual benefit to your wealth growth.

Looking at the components of the financial advisor value-add graphic above, the largest component is behavioral coaching. And yes, if you answered “b”, Behavioral Coaching, for my quiz, then you got it right. Yes, things like financial planning and investment management are very important but all of that can come off the rails when people allow their emotions to affect their decision making. Whether we know it or not, emotions sway our decision-making every day of our lives.

Ultimately, evolution of understanding and perspective leads to wisdom and it’s this evolution, self-reflection, and maturity of thought that helps many people get better results in their lives.

2023 Q3  Index Review Through September 30

Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Market segment (index representation) as follows: US Stock Market (Russell 3000 Index), International Developed Stocks (MSCI World ex USA Index [net dividends]), Emerging Markets (MSCI Emerging Markets Index [net dividends]), Global Real Estate (S&P Global REIT Index [net dividends]), US Bond Market (Bloomberg US Aggregate Bond Index), and Global Bond Market ex US (Bloomberg Global Aggregate ex-USD Bond Index [hedged to USD]). S&P data © 2023 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. MSCI data © MSCI 2023, all rights reserved. Bloomberg data provided by Bloomberg.

While the second quarter delivered robust returns for the U.S. market at 8.39%, the third quarter resulted in a slight pullback at -3.25%. 

Emerging Markets proved to be the best equity defense for the quarter at negative 2.93% while the Global Real Estate index dropped 6.49%. The U.S. bond market had a similar pullback with a negative 3.23% but the Global Bond Market ex-U.S. somewhat held its ground at negative 0.78.

Overall it was a general slight pullback across markets.

An added note on bonds, there was a wide dispersion of returns for the quarter depending significantly on duration. Interest rates increased across all bond maturities in the US Treasury market for the quarter but we can see the difference in returns for the 3rd quarter in the table below ranging from positive 1.31% to negative 11.79% which clearly illustrates that not all bonds are the same and it’s important to have a thoughtful bond strategy within your portfolio. 

One basis point (bps) equals 0.01%. Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Yield curve data from Federal Reserve. State and local bonds, and the Yield to Worst are from the S&P National AMT-Free Municipal Bond Index. AAA-AA Corporates represent the ICE BofA US Corporates, AA-AAA rated. A-BBB Corporates represent the ICE BofA Corporates, BBB-A rated. Bloomberg data provided by Bloomberg. US long-term bonds, bills, inflation, and fixed income factor data © Stocks, Bonds, Bills, and Inflation (SBBI) Yearbook , Ibbotson Associates, Chicago (annually updated work by Roger G. Ibbotson and Rex A. Sinquefield). FTSE fixed income indices © 2023 FTSE Fixed Income LLC, all rights reserved. ICE BofA index data © 2023 ICE Data Indices, LLC. S&P data © 2023 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. Bloomberg data provided by Bloomberg.

Finally, I’ve included index performance for the last year through September 30 2023 below and it’s actually been a robust year for returns even in consideration of the 3rd quarter pullback. 

Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Market segment (index representation) as follows: US Stock Market (Russell 3000 Index), International Developed Stocks (MSCI World ex USA Index [net dividends]), Emerging Markets (MSCI Emerging Markets Index [net dividends]), Global Real Estate (S&P Global REIT Index [net dividends]), US Bond Market (Bloomberg US Aggregate Bond Index), and Global Bond Market ex US (Bloomberg Global Aggregate ex-USD Bond Index [hedged to USD]). S&P data © 2023 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. MSCI data © MSCI 2023, all rights reserved. Bloomberg data provided by Bloomberg.

Morgan H Smith Jr. is an investment advisor with WorthPointe, LLC, a registered investment adviser in San Diego, Calif. WorthPointe is registered with the Securities and Exchange Commission (SEC). Registration of an investment advisor does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the commission. WorthPointe only transacts business in states in which the firm is properly registered or is excluded or exempted from registration. A copy of WorthPointe’s current written disclosure brochure filed with the SEC, which discusses among other things, WorthPointe’s business practices, services, and fees, is available through the SEC’s website at www.adviserinfo.sec.gov.

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