Advisor Impact on Net Worth
This calculator is based on the assumptions and equations detailed in SmartAsset’s whitepaper, “The Value of a Financial Advisor: What’s It Really Worth?”. Users can input their own data – such as their current age, planned retirement age, income and investments – to find the projected value a financial advisor could be worth over their lifetime. Advanced fields let users customize other inputs such as their investment performance, the rate of inflation over time, their savings rate, and rate of withdrawal in retirement.
Assumptions come from SmartAsset’s whitepaper, “The Value of a Financial Advisor: What’s It Really Worth?” For years left until retirement, the client is assumed to be contributing a percentage of their income to their investments. These investments are assumed to grow over time, while fees are deducted in cases where the client maintains the services of a financial advisor. In either case, values account for inflation and are presented in today’s dollars.
During retirement, savings contributions are assumed to end and withdrawals from the investment pool are assumed to be 4% unless user inputs dictate otherwise. Default values reflect an assumption that a retiree will reallocate their investments to a more conservative mix with a lower rate of return. Fees are still removed in the case the client has an advisor and inflation is accounted for.
The default value for inflation (2.56%) is based on annual historical data for 2000 through 2023. The default value for investment performance is based on S&P 500 performance (investment growth during career) and Moody’s AAA rated corporate bonds performance (investment growth during retirement) for January 2000 through August 2024. The default annual savings rate (5.69%) is based on historical data from the Federal Reserve for the same time period.
An advisor is assumed to yield an additional annual average of 1.0495% of a client’s income in tax savings during their career and 2.47% premium in annual returns, whether through investment allocations and performance, general guidance and coaching, or other more custom areas of financial benefit.
Advisor fees are removed from the net worth over time. Fees are 1% annually for people with an inputted current net worth of less than $1 million. At $1 million starting net worth and above, annual fees are 0.75%.
The duration of the relationship between the client and the financial advisor is assumed to end at age 77. A divergent assumption from the whitepaper in order to allow senior users access to the calculator is that if the user inputs their current age as 68 or older, the duration of the relationship is assumed to be 10 years.
This hypothetical example is for illustrative purposes only and does not represent an actual client or specific security. Actual results will vary.
This is not an offer to buy or sell any security or interest. All investing involves risk, including loss of principal. Working with an adviser may come with potential downsides such as payment of fees (which will reduce returns). Past performance is not a guarantee of future results. There are no guarantees that working with an adviser will yield positive returns. The existence of a fiduciary duty does not prevent the rise of potential conflicts of interest.
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