At Hill Investment Group, we believe in helping our clients take the long view when it comes to their financial well-being. But what does that mean in practice? It’s about more than just numbers; it’s about finding strategies that improve your financial outcomes and give you peace of mind. 

Quantifying the Impact of Financial Advice

Several research studies have attempted to quantify the value of good financial advice. Vanguard estimates the impact at up to 3% per year, calling it “Advisor’s Alpha.” Morningstar refers to it as “Gamma,” measuring it at 1.59% per year for retirees. While the terminology may differ, the consensus is clear: thoughtful, evidence-based financial advice can significantly enhance your financial outcomes over time.

At Hill Investment Group, we believe this value goes beyond just dollars and percentages. It’s about guiding you through market fluctuations, life changes, and financial decisions with a steady hand, always focusing on the big picture.

The Behavioral Factor: Turning Plans into Action

One of the most overlooked benefits of working with a financial advisor is ensuring that the plan actually gets implemented. Most people know they should save more, spend wisely, and avoid emotional investing decisions, but turning intention into action is another matter entirely. This is where Hill Investment Group comes in—providing the support, coaching, and accountability needed to take the long view and stay the course.

The “Compared to What” Problem

Measuring the value of financial advice isn’t straightforward. It’s one thing to compare two specific strategies and determine which is better. It’s another to assess how much value a financial planner adds in the abstract, especially when we can’t know how someone would have behaved without the advice.

For example, a strategy that maximizes wealth might not be best if it leaves you feeling anxious about potential losses. What truly matters is how well a strategy aligns with your goals and risk tolerance. A financial plan that looks perfect on paper might not be ideal if it keeps you up at night. At Hill Investment Group, we focus on strategies that not only work on spreadsheets but also fit seamlessly into your life.

More Than Just Portfolio Management

Financial advice goes beyond portfolio management. It touches on various areas like tax planning, insurance, estate planning, and retirement strategies. And while some benefits, like tax savings from effective asset location, are easier to quantify, others, like peace of mind from knowing your financial house is in order, are invaluable.

The Bottom Line

At Hill Investment Group, we believe that the true value of financial planning is not just in the strategies recommended but in their execution and alignment with your personal goals. It’s not just about achieving higher returns or paying less in taxes—it’s about living a life where your finances support your well-being and aspirations. That’s the essence of taking the long view.

At Hill Investment Group, we recognize that when a few clients raise the same question, it’s likely that more have similar thoughts. To better serve you, we’re introducing a new segment in our newsletter where we’ll address common questions and how we approach them. To submit questions for future newsletters, email us at info@hillinvestmentgroup.com

Hey Hill, what should I do about 401k accounts with previous employers?

Congratulations! You just started a new job that provides fulfillment, purpose, and great rewards. In your initial weeks, your new employer offers you a new retirement plan with wonderful investment options and a generous company match. 

What can you do to maximize the value of your current retirement plan as a part of your overall portfolio? What about the employer retirement plan you left behind with your previous job? 

For your current plan:

• We can incorporate your retirement plan assets into your overall plan and portfolio. This helps us stay in line with your goals and can help with after-tax returns. You can find more details here.

For the plan you left behind with your previous job: 

You have four basic options:

1. Leave the money in your old employer’s plan. (Usually not a great idea.)
2. Transfer the funds into your new employer’s plan.
3. Transfer the funds into your existing IRA (traditional and/or Roth).
4. Cash-out the plan and pay the taxes and penalties, if applicable.

Here are some key factors that may influence your decision: 

• Employer plans have a set menu of investment options and associated fees. While you may be satisfied with those options, a rollover IRA will not limit investment options and generally allows you to invest at a lower cost. 
• Many who hold on to old employer plans tend to lose track of them; therefore, they are rarely rebalanced as the market changes nor managed as part of their household portfolio.
• Many plans have pre-tax and Roth components, which may or may not align with a new employer’s plan offerings, but they can be easily rolled over to your traditional and Roth IRAs.
• Cashing out of the plan may involve unnecessary penalties and taxes.
• A unique feature of a 401k is that you can borrow money against it but not from an IRA.
• If you utilize a Backdoor Roth strategy, you may prefer to keep your retirement funds in a 401k to avoid the complications of a non-zero balance IRA account.

In the end, the combination of the above factors leads many to roll over their old plan to their individual IRA. This IRA becomes a hub as they move in and out of employers’ plans throughout their careers. On balance, the ability to choose your low-cost investment options in harmony with your other assets makes the option to roll over into an IRA a sound decision. 

Anytime you change jobs, we encourage you to discuss your situation with your Hill advisor. One size doesn’t fit all, and your advisor can help you work through your situation. Book a call with us if you have questions!

Hill Investment Group is a registered investment adviser. Registration of an Investment Advisor does not imply any level of skill or training. This information is educational and does not intend to make an offer for the sale of any specific securities, investments, or strategies. Investments involve risk, and past performance is not indicative of future performance. Return will be reduced by advisory fees and any other expenses incurred in managing a client’s account. Consult with a qualified financial adviser before implementing any investment or financial planning strategy.

Historically, the US Equity market has returned about 10% annually to investors from 1926 – 2022. Due to this historical rate of return, many investors expect this level of return year over year. However, stock markets are highly volatile. Although the average is 10% per year, it is extremely rare for the market to be up 10% over any given year.

Since 1927, there have only been 6 years where the stock market returned between 8-12%. Thus, even though you should expect the market to give you a 10% return, you should expect the market over any given year to hardly ever give you a 10% return. It is this bumpy road that creates the risk in investing in equities, which is why you are compensated with the 10% annual average return. The key is to take the long view and not look at quarter-to-quarter or year-to-year returns.

People often panic when their expectations don’t match reality. Investors expect a 10% return every year, which will often not materialize. When the market goes down and does not match this 10% expectation, investors tend to panic. Changing your expectations on the range of outcomes of equities while keeping in mind the long-term average can help investors stick to their plan.

Hill Investment Group is a registered investment adviser. Registration of an Investment Advisor does not imply any level of skill or training.  This information is educational and does not intend to make an offer for the sale of any specific securities, investments, or strategies.  Investments involve risk, and past performance is not indicative of future performance. Return will be reduced by advisory fees and any other expenses incurred in managing a client’s account. Consult with a qualified financial adviser before implementing any investment strategy.

Hill Investment Group may discuss and display charts, graphs, and formulas which are not intended to be used by themselves to determine which securities to buy or sell, or when to buy or sell them. Such charts and graphs offer limited information and should not be used alone to make investment decisions.