financial advice

Markets drive up value of advice

market value of advice

Financial advice has been a key factor in helping investors handle volatile markets, with advisers considered a source of value by their clients.

The value of financial advice has risen in the face of prolonged market volatility faced by investors, according to annual research from a global investment manager.

The Russell Investments fifth annual “Value of an Adviser Report”, released yesterday, found the quantifiable value of an adviser’s contribution to their clients’ portfolios had risen to 5.8 per cent in 2022.

The report states the value of an adviser calculation is drawn from five elements: behavioural coaching, appropriate asset allocation, tax-savvy planning and investing, choices and trade-offs, and the value of an adviser’s years of professional expertise.

Russell Investments Australia head of adviser and intermediary solutions Neil Rogan said advisers had continued to be valuable to their clients over the past year, which had been affected by supply chain issues, inflation, rising interest rates and geopolitical conflicts.

“The past two years have been challenging for investors, with many facing these prolonged levels of volatility for the first time in their investing lives. As a result, many investors have turned away from investment markets, seeking shelter in assets like cash, which they believe to be safer,” Rogan said.

“In their role as a behavioural coach, advisers have helped their clients remain invested through the turbulence, preparing them for an uncertain future and working with them to determine their post-pandemic goals.

“This year, that aspect of an adviser’s role alone is responsible for 2.9 per cent of portfolio value.

“We believe that being in an asset allocation that is appropriate to an individual’s personal needs, as identified by their adviser, can be worth up to 1.6 per cent per annum in annual portfolio value, particularly in periods of market instability such as those investors are currently experiencing.”

The report added the remaining 1.3 per cent of quantifiable adviser value was drawn from tax-savvy planning and investing and 23 per cent of investors consider tax effectiveness as one of their top three investment concerns.

The other factors, regarding making choices and trade-offs, and the value of an adviser’s years of professional expertise were considered to be valuable even they could not be fully quantified and while 55 per cent of Australians were considered financially literate, 83 per cent of advised Australians report feeling peace of mind about their future.

“The value of an adviser isn’t limited to their positive portfolio impact. Advisers are experts at simultaneously incorporating their emotional expertise into their technical capabilities to help clients overcome periods of immense personal and family challenges such as trauma, illness and death,” Rogan said.

“These tangible, but non-quantifiable, qualities also extend to how advisers help their clients synthesise the myriad combination of personal goals, circumstances, preferences and considerations into a cohesive plan to provide their clients with financial certainty.”

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