Looking to build a practice through beating the market and adding alpha is a low-probability scenario in my book.

In fact, since that alpha is a zero-sum game before costs, I have calculated the probability of traditional alpha as well under 10% over 10 years.

Instead, consider building the practice with “advisor’s alpha,” a term coined in a Vanguard paper, which it estimates can add 3 percentage points per year to a client.

Advisor’s alpha is concentrating on such things as building a low-cost broad portfolio, maximizing tax-efficiency, behavioral coaching, rebalancing, and providing direction on savings and spend rates.

By building a broad low-cost portfolio, the client has less risk and keeps a greater share of returns. There is a slew of research demonstrating that broader is better, and even advisors tend to performance chase on narrow funds; remember when managed futures were hot?

In addition, investing is simple, but taxes aren’t.

Clients rarely come to us with situations that won’t involve incurring taxes to sell current portfolios, and taking into account tax implications is key in both selling existing holdings and building the new portfolio. For that reason, locating the assets in the right tax wrappers -- taxable, tax-deferred and tax-free Roth individual retirement accounts -- is critical.

When it comes to behavioral coaching, there is also ample research showing that individual investors tend to underperform the market by 1 to 2 percentage points annually due to bad timing. That is the difference between fund-weighted and dollar-weighted returns.

Helping the client understand that hot asset classes will cool off and that neither bad nor good times last forever is part of advisor’s alpha. My research shows that rebalancing can not only eliminate that dollar-weighted to fund-weighted shortfall, it can turn the gap into a surplus.

We can add further value by helping clients understand how much they need to save for retirement.

For example, we can tell them that buying the new luxury car every three years will mean they have to work for another five years. That helps in decision making.

And helping the client understand how much they can safely spend and where to take the money from is a key value-added service we can provide.

Sure, all this is good for the client, but how does it help advisors build their practices? In a word, referrals.

Clients will so appreciate how much value the advisor is adding that they will tell their friends and family, as will the clients’ CPAs and estate planning attorneys with whom advisors work.

Advisors who impress enough people will find that their practices grow.

Allan S. Roth, a Financial Planning contributing writer, is founder of the planning firm Wealth Logic in Colorado Springs, Colo. He also writes for The Wall Street Journal and AARP the Magazine and has taught investing at three universities. Follow him on Twitter at @Dull_Investing.

This story is part of a 30-day series on smart ways to grow your practice.

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