Great South Bay Advisors: Why A Good Financial Advisor Still Matters

“Why do I need a financial advisor?”

It’s a fair question, and one I hear more often than you might expect: “Why should I pay someone to manage my money when I can buy an index fund on my phone?” With low-cost funds, free trading apps and now artificial intelligence that can answer almost any financial question in seconds, it deserves an honest answer.

These questions are often backed by an important misconception: The role of a good financial advisor is not to “pick the best stocks” or “beat the market.” A good advisor earns their keep in far less glamorous ways: helping you avoid costly mistakes, keeping more of your money away from the IRS, turning a lifetime of savings into a reliable paycheck, helping to eliminate the psychological pressures and emotional pitfalls that come with saving and investing, constructing a portfolio that fits your specific needs, and coordinating the dozens of financial decisions that rarely get made in isolation.

What The Research Says

The most widely cited study on this question comes from an unlikely source: Vanguard, the company that built its reputation on do-it-yourself index investing. Since 2001, Vanguard’s researchers have tried to measure the value a good advisor adds through a framework they call “Advisor’s Alpha.” Their conclusion is that following sound wealth management practices can add about 3% in net returns annually for clients.

That number comes with two important caveats, and Vanguard is upfront about both. First, the 3% is not a guaranteed annual bonus. The value tends to arrive unevenly, often concentrated in a handful of moments when markets are in turmoil or euphoria, or when there is an impactful planning decision being made. Second, the benefit varies widely depending on each person’s circumstances.

What I find most useful is how Vanguard breaks the value down. Low-cost implementation adds roughly a third of a percentage point. Disciplined rebalancing adds about a quarter point. Smart placement of investments across taxable and tax-advantaged accounts can add up to three-quarters of a point, and an informed withdrawal strategy in retirement up to 1.1 points. The single largest contributor, at an estimated 1.5 percentage points, is something that never appears on a statement: behavioral coaching. All of these are fundamental and repeatable value-adds that apply to basically every investor. Depending on your circumstances, more bespoke planning tools could create significantly more value.

This Vanguard research is backed by another well-trusted name in the financial services world. Morningstar researchers David Blanchett and Paul Kaplan studied five core retirement planning decisions, including asset allocation, withdrawal strategy and tax efficiency. They estimated that making those decisions well could produce about 23% more retirement income, roughly the same effect as earning an extra 1.59% a year. The methods differ, but the message is consistent: The value of advice is real, and it comes mostly from planning and discipline rather than from picking winners.

The Most Valuable Thing An Advisor Does

Every year, Morningstar publishes a study called “Mind the Gap,” comparing what funds earn with what the people who own them actually earn. The 2026 edition found that the average dollar invested in U.S. mutual funds and ETFs earned 8.7% a year after fees over the decade ending in 2025, while the funds themselves returned 9.9%. That shortfall of about 1.2% a year has shown up consistently, and it reflects when investors bought and sold, not how the funds performed.

In plain English, investors tend to buy after prices have risen and sell after they have fallen. Nobody does this because they are foolish. They do it because they are human. When the market drops 20% and the headlines are frightening, selling feels like the responsible thing to do. When a hot stock doubles, missing out feels unbearable.

This is where an advisor earns the fee many times over. Vanguard notes that a single well-timed conversation, talking a client out of selling at the bottom of a bear market, can be worth more than decades of advisory fees. That kind of value never shows up on a statement because you never see the loss you didn’t take.

For retirees, the stakes are higher still. As I’ve written before about sequence-of-returns risk, a large loss in the first few years of retirement, especially one locked in by selling, can permanently shrink what your portfolio can support. A steady hand at that moment matters more than at almost any other point in your life.

Are You As Diversified As You Think?

Index funds are one of the best things ever to happen to individual investors. They are low-cost, tax-efficient and simple. But their popularity has created a blind spot that many investors don’t see.

Most popular index funds, including the S&P 500, are weighted by company size. The bigger a company gets, the more of every new dollar it receives. As trillions of dollars have flowed into these funds, many analysts believe that steady stream has helped reinforce the dominance of the largest companies. According to RBC Wealth Management, the 10 largest companies made up about 19% of the S&P 500 at the end of 2015. By the end of 2025, they made up nearly 41%, a record.

In other words, more than $40 of every $100 invested in an S&P 500 fund now goes to just 10 companies, and many of them are tied to the same themes: technology in general and artificial intelligence specifically. A fund that holds 500 stocks can still behave like a much narrower bet. To be fair, today’s giants are highly profitable businesses, and concentration alone does not mean a bubble, but it does mean the risk is not spread as widely as many investors believe.

The problem compounds when investors own several funds that look different but hold the same companies. An S&P 500 fund in a 401(k), a total market fund in an IRA, a technology fund in a brokerage account and a few favorite individual stocks can add up to a large bet on a handful of names. A good advisor looks through every account to show you what you actually own and whether it matches the risk you intend to take.

Keeping More Of What You Earn

It’s not what you make; it’s what you keep. For most Long Island families, taxes are the largest expense they can actually control, and a good advisor treats tax planning as a year-round job rather than an April scramble.

Many of the topics I’ve covered in this column fall into this category. Asset location means holding tax-inefficient investments like taxable bonds inside IRAs and 401(k)s, and tax-efficient stock funds in taxable accounts. Roth conversions, done in the right years and in the right amounts, can reduce lifetime taxes and leave heirs a tax-free inheritance. Withdrawal sequencing, meaning which account you draw from and when, can add meaningfully to how long your savings last.

These decisions interact with one another in ways that are easy to miss. A Roth conversion that looks smart on its own might push your income over a Medicare IRMAA threshold and raise your premiums two years later. A large capital gain might cost you more than you expect once state taxes are included. Charitable gifts made from an IRA through a qualified charitable distribution can be far more tax-efficient than writing a check. None of this is exotic, but getting it right requires looking at your whole picture every year, not just your portfolio. All of this is a full-time job, and it makes sense to have someone knowledgeable and experienced dedicated to it.

Seeing The Whole Picture

Most people spend decades learning how to save. Very few are ever taught how to spend down savings safely, and retirement is when the decisions get harder, not easier. When should you claim Social Security? How much can you safely withdraw each year? Should some of your savings guarantee income, and how do you plan for a long-term care need that may never come?

Then there is everything outside the portfolio. Are your beneficiary designations current? Does your estate plan account for New York’s estate tax cliff, which can tax an entire estate once it exceeds the exemption by just 5%? Does your spouse know where everything is and whom to call if something happens to you?

A good advisor acts as the quarterback for all of this. They won’t replace your attorney or your accountant, but they make sure everyone is working from the same playbook and that nothing falls between the cracks. In my experience, the most costly financial mistakes rarely come from a bad investment. They come from two good decisions that were never coordinated.

Peace Of Mind, And What To Look For

Vanguard’s researchers are candid that some of the value of advice can’t be measured at all. For many people, it is simply peace of mind: knowing someone competent is watching and having more time for family, grandchildren and the things they actually enjoy. Vanguard compares it to hiring a painter. You may be perfectly capable of doing it yourself, but you might reasonably decide your time is better spent elsewhere.

That brings us back to technology. Artificial intelligence will make financial information cheaper and more accessible than ever, and that is a good thing. But information has never really been the problem. When you ask most investors about what it takes to succeed long-term, they will talk about “buying low and selling high,” riding out market declines and never panicking. But the hard data shows that very few put these ideas to work when it matters most.

Knowing what to do is easy compared with actually doing it, especially when markets are falling or a family is grieving. An app can tell you not to panic. It can’t sit across the table from you when you are tempted to.

So, why work with an advisor? Not to beat the market, but to capture more of what the market gives you. Not for a hot tip, but for a plan that ties your investments, taxes, income and estate together. And most of all, for a steady partner who helps you stick with that plan when your instincts are telling you to abandon it.

The right advisor won’t make every year a good one. But over a lifetime, they can help make sure the good years count and the bad ones don’t cost you more than they should.

Robinson Crothers is Managing Partner at Great South Bay Advisors in Holbrook. This column is for general educational purposes and is not individualized investment, tax or legal advice. Securities and investment advisory services are offered through Osaic Wealth, Inc., Member FINRA/SIPC.

Great South Bay Advisors and Osaic Wealth, Inc. are not affiliated.