Index funds are associated with do-it-yourself investors and financial advisors are typically aligned with actively managed investments, right?

But shuffle the deck and you get what the financial advisor and author Mark Hebner believes to be the most advantageous business model and perhaps the most neglected: the passive advisor.

Hebner’s idea is simply to work with low-cost and, in his view, superior investment products employing a passive investment strategy while providing needed advice at a below-average asset-based fee.

Yet the low-cost approach hasn’t been bad for business.

Index Funds Advisors (IFA), the firm Hebner founded and runs, manages $1.8 billion in assets, making the Irvine-Calif.-based company one of the top 50 RIAs in the country, he said in an interview with AdvisorOne.

Mark HebnerAdvisors “will sleep a lot better knowing they are doing the right thing for their clients; they will provide a better investment experience for their clients and themselves; and they will make a lot more money in the long term because of client retention,” Hebner (above) says.

The author of Index Funds: The 12-Step Recovery Program for Active Investors, Hebner is currently exploring expanding his firm’s investment management through the establishment of a turnkey asset management program.

To many investors, and perhaps to some advisors, a “passive advisor” seems like an oxymoron, leading some to ask whether paying an advisor defeats the whole point of a low-cost indexing approach.

But Hebner is adamant that investors do better—much better, actually—when they have an advisor, and he offers reams of data and studies to support his point.

He put together one chart, for example, citing eight different studies (from different sources and covering different time periods spanning 30 years) showing that average fund investors—without passive advisors—captured on average just 36.75% of fund returns.

Indexers without passive advisors more than doubled that, capturing on average (based on three studies) 82.70% of fund returns.

But a 2005 Morningstar study showed that on a dollar-weighted basis, Dimensional Fund Advisors (DFA) investors—all of whom use passive advisors—captured 109% of the funds’ time-weighted returns over a 10-year period.

How is this possible? Apparently, the savvy advisors who DFA trains keep their clients invested through market turbulence, have them rebalance when funds are out of favor, and harvest clients’ tax losses.

The non-technical aspect of all this is what Hebner calls emotions management.

“We are emotional beings. Even John Bogle indicated that at Vanguard [home to many non-advised investors], the average dollar-weighted return is below the time-weighted return.”

So while the S&P 500 returned about 7.5% on average over the past decade, few investors captured that return, Hebner says. “They didn’t buy it 10 years ago and hold it during the big periods of decline.”

One reason he cites for investors’ failure to hold their investments is anxiety over perceived market trends. “It’s only human to have the ‘prediction addiction,’ and for humans to act on the emotions of fear and greed. When they rely on those they make precisely the wrong choices in their investment decisions,” he says.

Hebner believes passive advisors who truly understand and subscribe to the DFA pure passive approach (he believes only a minority of DFA advisors “really do a good job” of this) optimize investment performance.

That is because, first of all, “they get an advisor when they get DFA funds,” but also because “disciplined rebalancers are selling bonds and buying equities after a 50% stock market decline. That is not the behavior of an average investor.”

In bridging the gap between investment returns and actual investor returns, Hebner believes the guidance of a high-quality passive advisor—especially one armed with the data found in his book—may be all there is to thwart investor self-destruction.

“I literally put them through rehab,” he says of many of his own clients. “They still want to buy and sell at the wrong time. The real difference is they have someone to call who has the data to refute what they’re trying to do.”

What those who call want to do is buy based on perceptions of bullish market trends, or sell based on fear of negative trends. These are emotions, which passive investors who embrace market randomness are less subject to. But, he says, passive investors working with advisors become disciplined rebalancers who buy low and sell high in order to maintain a target allocation.

“There is an average of 5 million buyers and 5 million willing sellers a day trading 10 billion shares of stock a day,” he said. “When we rebalance our portfolios, we’re on the other side of the trade of the active trader.”

Another pitfall of unadvised investors is ignorance of their own investment performance, says Hebner. “I’ve yet to see a quality performance report on an individual’s investment return. It takes very sophisticated software to provide an accurate dollar-weighted return.”

“If you don’t measure your performance,” he adds, “how do you really know how well you’re doing? This is your money. You have to live off of it 25 years in your retirement. It’s not something you want to be cheap about,” he says, meaning that the importance of personal finance merits hiring a financial advisor.

“You want to be cheap in the investments you pick, but you want to pay a fair price for your advice,” adds Hebner, whose firm charges a 0.9% fee on the first $500,000 in assets, sliding down to lower fees on higher asset levels.

Those fees pay for the evaluation, selection and monitoring of index investments, and a lot more, says Hebner. “There are thousands of index investments for investors to choose from. It requires a fairly high level of expertise, understanding the academic literature and the risk-related returns,” he says.

His IFA advisors take advantage of “tax-loss harvesting opportunities and monitoring the risk level appropriate for the investor as time goes on, and provide advice on other aspects of wealth management,” such as estate planning, insurance, cash flow management and withdrawal strategies in retirement, he says.

Hebner’s bracing message is not directed only at investors, but to non-passive advisors as well.

“If that’s where you are stuck, you should move,” he says of advisors affiliated with brokerage firms. “Every investment advisor should be a fiduciary for their clients, which means they look out for the best interests of their clients even if it goes against their own interests.”

“Look at every brokerage agreement,” he continues. “It shows that the firm is not acting as a fiduciary for the client.”

Quoting from a brokerage firm agreement that reads, “We do not have a fiduciary or advisory relationship with you,” Hebner says “anyone who understands what those words mean should leave.

“That means they’re going to sell you things that make them money as opposed to doing what makes you the most money,” he says. “When I explain this to potential clients, their jaws drop.”