Don is joined by Mike DeJoseph from Vanguard to unpack the meaning and real-world impact of Advisor’s Alpha—Vanguard’s research showing how good financial advisors can add up to 3% annually in net value to client portfolios. They break down the origins of the concept (internally coined back in 2001), clarify what alpha actually means, and dig into where that added value comes from: behavioral coaching, tax-efficient strategies, lower costs, smarter withdrawal planning, and disciplined asset allocation. Mike emphasizes that unlike investment alpha, which is a zero-sum game, advisor alpha is a positive-sum benefit rooted in planning and emotional guidance. They challenge misleading marketing from high-fee brokers, expose the damage of poor advisor behavior, and highlight what separates a “good” advisor from a truly great one—namely, those who align clients’ values with their money. The conversation ends with a forward look at AI’s role in advice: not replacing advisors, but augmenting their ability to listen, guide, and support clients like financial therapists. 

0:04 Don introduces rare guest: Mike DeJoseph of Vanguard

0:35 The origin of Vanguard’s Advisor’s Alpha paper

1:27 What is alpha? And what makes it positive for advisors

2:49 Advisor value beyond investment products

3:36 Explaining alpha in terms of benchmarks and behavior

5:05 Why investment alpha is rare, but advisor alpha isn’t

6:25 Positive-sum vs. zero-sum advice outcomes

7:37 Misunderstanding the 3% alpha number

9:48 Behavior, taxes, and cost drag reduce investor returns

11:06 How advisors improve tax allocation and drawdown

11:55 3% does not include asset allocation or manager selection

12:06 Why active manager outperformance remains elusive

13:17 Vanguard’s history with active management and costs

14:45 Active equity vs. active bond management

16:14 What makes an advisor “great,” not just good

17:39 Helping clients align money with values

18:27 Behavioral coaching during market downturns

21:07 Holistic financial advice vs. performance promises

21:47 Why 100% fiduciary advisors are rare—and how to spot one

22:45 Advisor compensation models: from commission to fees

24:06 Shocking stat: commissions down from 80% to 10% since 2010

25:16 How smart investors forced the industry to change

26:44 What a 3% fee does to advisor alpha

28:34 Overcharging kills word-of-mouth trust

29:43 What bad advisor behavior looks like

31:45 Vanguard’s approach to advisor education and ethics

33:41 Where the industry goes next: better advice, better business

34:19 AI’s role in improving advice, not replacing it

36:36 Tech that enhances human connection and insight

37:22 The future: more therapist, less product-seller

37:55 Final advice: if they talk about returns, walk away

38:44 Mike reflects on working with great advisors—and Vanguard’s mission

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