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Russell says advice adds 5.5% a year and Vanguard says 3%. A disciplined, rules-based approach captures much of that, but not all of it. I think these reports overstate things by assuming that without an adviser you'll panic, chase returns and keep changing strategy. In this episode I split the mistakes the reports cite into two groups: the ones a rules-based framework prevents, like concentrated portfolios, cash drag and return chasing, and the ones it can't, like ownership structures, how to allocate surplus cash flow, and super contribution strategy. I also cover why knowing the rules isn't the same as following them, the March 2020 test of your own discipline, and the portfolio size at which advice pays for itself.
00:00 The "advisor fee: $0" bill that prompted this episode
00:55 Revisiting episode 319 and the Russell and Vanguard reports
01:51 Why I'm sceptical of these estimates
02:31 What if you already follow a rules-based framework?
03:23 Breaking down Russell's 5.5%
04:53 Vanguard's Adviser's Alpha framework
06:07 The wealth equation and where mistakes cost real money
07:25 Separating the mistakes rules can and can't prevent
07:46 Portfolio design mistakes a rules-based approach fixes
10:20 Complexity and knowledge gaps rules can't fix
12:34 When the numbers make advice worthwhile
13:18 Why knowing what to do isn't enough
16:15 The best days in the market and why indexing works
17:48 The acid test: what did you do in March and April 2020?
20:19 Economies of scale: when advice pays for itself
22:12 Choosing an adviser as a decision that moves the dial
22:59 Using someone you trust as a sounding board
23:52 Summing up
25:26 Next week: how much insurance you actually need
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