Value of Professional Advice vs. DIY

The High Cost of Going It Alone: How Professional Guidance and Better Decisions Add Up

Introduction
Investing is about more than just choosing stocks or funds—it’s about making smart decisions year after year. Research from DALBAR and Vanguard’s “Advisor Alpha” shows that working with a financial advisor can add meaningful value to your portfolio over time. While paying an advisory fee may seem like a cost, trying to manage everything yourself also has its price, both in terms of time and returns left on the table.

What the Studies Show

DALBAR Studies: Average investors often underperform the market because of emotional decision-making—buying high, selling low, or abandoning plans mid-stream.
Vanguard’s Advisor Alpha: Vanguard estimates that good advisors can add around 3% per year in value by focusing on areas like behavioral coaching, proper asset allocation, rebalancing, and tax-efficient investing. Even after paying a fee, investors often come out ahead because they avoid costly mistakes and keep more of their returns working for them.

Investor A vs. Investor B: A 10-Year Comparison
Let’s consider two investors starting with $200,000 and investing over 10 years:

Investor A (With Professional Advice)
- Works with a professional advisor who applies the best practices identified by DALBAR and Vanguard.
- Expected Investment Return Before Fees: 9% annually.
- Advisor Fee: 1.5% annually.
- Net Annual Return After Fee: Approximately 7.5%.
After 10 years at 7.5% growth, the $200,000 investment grows to about $412,000.
Investor B (Going It Alone)
- Manages their investments without professional guidance, failing to capitalize on advisor alpha and often making suboptimal decisions.
- Lacks the disciplined approach to avoid cash drag, poor diversification, and missed rebalancing opportunities.
- As a result, Investor B earns about 6% per year (a 3% shortfall from the 9% “optimal” benchmark due to emotional decisions, lack of structure, and inefficiencies).
After 10 years at 6%, the $200,000 grows to about $358,000.

The Cost of Time
Investor B might think they’re saving money by not paying an advisory fee. But managing investments effectively takes time—a lot of it. Suppose Investor B spends 40 hours per year researching, rebalancing, and trying to avoid mistakes. If we value their time at $161.50 per hour, that adds up to:

$161.50 × 40 hours = $6,460 per year in personal time value.
Over 10 years, that’s $64,600 of opportunity cost spent on managing the portfolio.

While this isn’t a direct hit to the investment balance, it’s a real cost. These hours could have been spent earning money elsewhere, enjoying personal activities, or furthering a career—any of which could provide greater value than fighting an uphill battle against poor investor behavior and market uncertainties.

The Bottom Line
After a decade:

Investor A ends with about $412,000 after fees, with minimal time spent and professional guidance steering them away from common pitfalls.
Investor B ends with about $358,000, having invested countless hours and still coming up short, both in returns and in personal opportunity costs.

In other words, even with a 1.5% annual advisory fee, Investor A’s disciplined, structured approach—founded on best practices highlighted by DALBAR and Vanguard—is worth it. They not only walk away with more money, but they also avoid the stress and extensive time commitment that comes with trying to manage everything alone.

Conclusion
Investing is about making the right choices consistently. Professional guidance can help you do that, often overcoming the cost of a fee with better returns, improved discipline, and less personal time wasted on trial-and-error strategies. Over the long run, the combination of expert advice, proper planning, and behavioral coaching can make the difference between ending up with a well-funded future or looking back on a decade of missed opportunities.

Disclosure: The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

Registered Representative, Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Fixed insurance offered through James K. Lancaster. Cambridge and Sterling Edge Financial are not affiliated. Cambridge does not offer tax advice.