Blog : DC Retirement | January 28, 2025

Can you quantify the emotional and time value of financial advice? What about the value of roadside assistance?

The Advice Guy blog series

Evan Wolf, CFP®
Senior Advice Strategist,
Institutional Investor Group
Paulo Costa, Ph.D., CFP®
Senior Behavioral Economist,
Investment Strategy Group
This may sound weird, but I was kind of glad when I needed to have my car towed a few weeks ago. I had just dropped my kids off at school, and when I returned to the car to head to work, the darn key would not turn in the ignition. After some unsuccessful googling and a frantic troubleshooting call with my mechanic, I gave up and had the car towed to the garage for some (expensive, of course) repairs to the ignition system. 
My productivity for the day was way down, my wallet was smarting, and my kids were no doubt embarrassed to see their dad in the school parking lot all morning. So why was I glad about any of it? Because it was great validation of the roadside assistance plan I’ve been paying for over the last 20 years. On paper, it’s been an expenditure for something I rarely need. But in reality, it’s also accounted for the comfort and peace of mind I’ve had along the way, knowing that when trouble strikes, as it did that morning, help is just a few minutes away. 

Maybe you see where I’m headed with the retirement plan advice connection. One of the most common questions I get asked when working with plan sponsors and consultants is “How do I know if an advice program is adding value for participants?” I wrote a recent blog post on this topic, and I’ll continue to come back to it given its importance, but here I’d like to focus on two aspects of advice value that are often overlooked.

Vanguard has been publishing research for years on the multiple pillars of advice value: financial, portfolio, emotional, and time value (here’s a recent example). While most people I speak with conceptually agree with all four sources, many fiduciaries tend to prefer metrics that can be quantified with cold, hard numbers. Emotional value? Too mushy. Time value? Too hypothetical.  

 

Can you provide a summary of what you were looking to learn in your research and the approach you took?

The American Psychological Association’s annual study on stress in America shows money as one of the top stressors in people’s lives.1 And money stress can take many forms: People may spend much of their day worrying about their finances, they may be ashamed of their financial situation, or their personal relationships may suffer.

At the same time, we often hear that advice can give people peace of mind. So my coauthors, Marsella Martino and Malena de la Fuente, and I surveyed more than 12,000 Vanguard clients, including advised and nonadvised retirement plan participants and retail investors, to better understand the role of advice in providing emotional value and reducing the time spent thinking about and dealing with their finances.2

What were the key findings most relevant to defined contribution plan sponsors and consultants?
We define the emotional value of advice as peace of mind, and our clients are definitely feeling it:
86 %
of Vanguard-advised clients reported increased peace of mind using advice compared with managing their money on their own. 
78 %
said that with advice, they were less concerned about their financial situation.

For time value, a recent research paper points out that Americans spend, on average, seven to eight hours per week thinking about their finances.3 At Vanguard, we found that number to be around four hours a week. Importantly for plan sponsors, at least one of those four hours seems to occur during work. That adds up to more than one workweek per year!

Interestingly, 76% of Vanguard-advised clients said that advice saves them time compared with managing their finances on their own. The median number of hours saved was two hours per week or more than 100 hours per year. In particular, 58% of advised clients said that Vanguard advice has reduced the number of working hours that they are distracted because of financial stress.

To summarize, our research shows that advised clients believe that the benefit of advice extends beyond portfolio construction and financial planning, delivering substantial emotional and time value as well. 

Were you able to draw any conclusions about the value of robo-advisors versus human advisors?

This is a simple question that is hard to answer. One key reason is that clients may choose one specific type of advice—robo or human—because it better fits their needs, so we never get to learn from them about the differences between the two.

Having said that, 88% of clients with human advisors reported greater peace of mind compared with approximately 70% of those using digital advice. While these populations shouldn’t be compared directly, since the underlying groups are different, I do think it’s still reasonable to conclude that:

  • Digital advice provides peace of mind to more than two-thirds of investors who use it.
  • Human advice is highly valued, providing peace of mind to the vast majority of clients.
A comment I hear occasionally is that emotional and time value is too soft or squishy to be worthy of consideration by fiduciaries. How would you respond if you heard that in a retirement plan committee meeting?

When we talk about the value of financial advice at Vanguard, we think about the four sources: portfolio construction, financial planning, emotional value/peace of mind, and time value. Portfolio construction and financial planning are delivered through the specific interventions that advice providers recommend for each investor. Emotional and time value are delivered through the process by which the advice provider produces, explains, and implements those interventions and ensures their follow-through.

When clients tell us in our survey that they have more peace of mind, are thinking less about their finances, and are less distracted in the workplace, I understand this as meaning that it’s because advice is helping them with their portfolios and financial planning. For example, for 68% of nonretired Vanguard-advised clients, having Vanguard advice increases their confidence that they can retire within their desired timeline.


Our survey shows that quantification of emotional and time value is possible, and it suggests that both the employee and the employer may benefit from financial advice. Paulo Costa, Ph.D.


I also see those data points as illustrating the value the employer is getting in terms of increased productivity of their employees given that they have fewer distractions. These sources of value have historically been hard to measure. Our survey shows that quantification of emotional and time value is possible, and it suggests that both the employee and the employer may benefit from financial advice.
So, what’s next? Where can people learn more about your research?

Vanguard has been a pioneer in research on the emotional value of advice, and now we’ve added the time dimension as well. We’ll be publishing our research later this year. And you can expect more from us in this field of study, as we know it’s important for our clients, for Vanguard, and for the financial advice industry.

Thanks so much, Paulo, and congratulations on this interesting and important research. I’m excited to see the full report soon. And maybe you’ll let me join you in a future YouTube video?

If I put my plan sponsor hat on (a fedora in case you were wondering), here’s what I’m taking away from this preview of Paulo’s research:
It’s certainly OK to continue evaluating my advice program based on more traditional metrics, like usage, performance, and retirement readiness.
But I can also acknowledge that emotional and time value are real and quantifiable, and they’re worthy of consideration in my managed account due diligence process. 
And finally, am I really losing more than a week per year to my employees worrying about their finances?
Thanks, as always, for reading. If you have reactions, questions, or ideas for future blog posts, please send me an email. And if you happen to be reading this while waiting for a tow truck, I hope you can find the silver lining in the experience like I did.
Questions?
Comments?
Ideas for future blog posts?  
Sources:

1 Stress in America 2024. American Psychological Association. October 2024. https://www.apa.org/pubs/reports/stress-in-america/2024.

2 Research findings based on responses of 7,700 advised clients out of 12,000 Vanguard clients surveyed.

3 Sergeyev D, Lian C, and Gorodnichenko Y. The Economics of Financial Stress. The Review of Economic Studies, November 15, 2024. https://academic.oup.com/restud/advance-article-abstract/doi/10.1093/restud/rdae110/7900971?redirectedFrom=fulltext.

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Notes:

All investing is subject to risk, including the possible loss of the money you invest.

Advice services are provided by Vanguard Advisers, Inc., a registered investment advisor, or by Vanguard National Trust Company, a federally chartered, limited-purpose trust company.