Is financial advice worth it?

What value does your adviser offer? Is it worth the fees? We look at these questions and share some fascinating research on the topic.

The value to you can range from allocating your investments correctly to providing investment growth or income, choosing superior investment options, tax efficiencies, more disciplined savings and behaviour coaching to avoid costly mistakes.

There are also softer value adds such as peace of mind,  better preparation for life’s challenges both expected and unexpected and legacy/estate planning.

One aspect that is often forgotten is the value of your time. Time is one of the most valuable resources you have, and financial advice can help you reclaim it. Advice can take care of tasks that you may not be willing or able to perform on your own, like research, planning, and ongoing management. That means more time for the things you actually want to be doing.

Most recently, the November 2022 Whitepaper “Financial Advice in Canada” highlighted several different studies that affirmed the value of financial advice. Perhaps the most well-known of these is Russell Investments’ “Value of an Advisor” study, conducted annually in the US for several years now.

In its 2022 report, Russell found that the approximate value of a financial adviser to their client was 4.91% – in other words, they added a net 4.91% to a client’s total return for the year. They broke this total value into four components:

Beyond this, we at Apex Private Wealth also follow a detailed and thorough investment process to choose and blend the best unit trust funds available in the market. We analyse funds starting with size, transparency, skill and experience of the fund managers, fees, their research and their decision-making process among other factors. This process then leads us to a list of limited funds that we can now consider for further qualitative and quantitative external research.

We monitor the funds on our “watch list” and the investment committee meets regularly to discuss, debate, compare and blend the best funds together. We also regularly meet with fund managers, of both the funds we use, as well as others we are watching closely. You can see more detail on our investment process on our website Click Here

This process results in our preferred model portfolios which we use as the basis for constructing clients’ investments. Over the past decade, this process has shown to deliver an average of 1.56% per year outperformance to competitors.

Another study, the “Value of Advice Report” by Canada’s CIRANO Institute in 2018, found that after 15 years of investing, advised investors had accumulated 2.3 times more assets compared to their unadvised counterparts. And even after only four to six years of investing with an adviser, clients had built up 1.58 times more assets. The factors identified as contributing to this better outcome were higher savings rates, a higher allocation to non-cash investments (i.e., high allocation to risk assets to match longer term liabilities), and better, disciplined behaviour through market downturns.

Financial advice is about so much more than the bottom-line number on your investment statements. It is about building a partnership that can lead to all kinds of good things, such as better long-term outcomes, a higher chance of reaching your goals, and a better outlook on your financial life.

As independent financial advisers, we can help you avoid expensive mistakes and make smart decisions with all aspects of your money.

Parts of this newsletter have been taken from “The Undeniable value of financial advice” by Pieter Hugo from M&G Investments (formerly Prudential Asset Management) for Cover Web Magazine. The full article is available here