Case Evaluation

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Is Your Financial Advisor Worth It?

If you were going to buy a new vehicle, chances are good that you would do some research before talking to the salesman. It is doubtful you would ask the salesman 'how much car do I need,' or 'which car is right for me.' Yet when it comes to investing, many people ask their financial salesmen (advisors) exactly those questions.

Typically, financial advisors invest their clients' money into the broader financial market, which for regular investors, basically means stocks and bonds (and financial products that bundle them, such as mutual funds, index funds and ETF's). According to statistics compiled by The Vanguard Group, between 1926 and 2017, the U.S. stock market returned 10.3% annually, losing money 25 years out of 92. Conversely, the U.S. bond market returned 5.4% annually, losing money 14 years out of 92.[1] Over the long term (i.e. 15 years or more) professional fund managers trying to beat the market fell short close to 95% of the time.[2] Despite this, many advisors charge their clients thousands of dollars annually in fees. An increasing number of people are questioning whether those fees are worth it.

How to Evaluate Your Financial Advisor’s Performance:

Since your advisor is most likely investing your funds into the broader market, that makes an appropriate metric against which to benchmark investment performance. Through use of the chart below, you can, for example, measure the performance of your investments between certain dates, against a number of major indicies. For example, if your advisor had invested $10,000.00 for you on January 1, 2000, and it was worth $20,000.00 today, it would have performed better than some indicies, and worse than others (ignoring the effect of dividends). You can try this yourself by entering an initial investment amount, starting date, ending investment amount, and ending date, and hitting ‘Chart’ below. Indicies include the Dow Jones Industrial Average (DJI), S&P 500 (GSPC), Nasdaq (IXIC), Russell 3000 (RUA) and the TSX (GSPTSE). Below the chart, the various compound rates of return are shown.

Comparing Stock Performance

Likewise, you can also chart the performance of individual stocks for various time periods, or compare stocks against various indexes, such as the DJI, GSPTSE, RUA, IXIC or GSPC.

[2]See Hulbert, Mark, This is how many fund managers actually beat index funds, May 13, 2017, @ or see Bukhari, Jeff, Stock-Picking Fund Managers Are Even Worse Than We Thought At Beating the Market, April 13, 2017@

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