Financial advisers have added nearly 6 per cent in value for clients in the past year, with much of this stemming from their ability to steer people away from making decisions that would negatively impact them, according to a new report released today by Russell Investments.
The seventh annual “Value of an Adviser Report” found they add at least 5.7 per cent a year in value for their clients, with 3.3 per cent of that due to the “behavioural coaching” role they provide, which includes helping people avoid rash decisions during volatile markets and encouraging them to maintain a disciplined approach to investing instead of chasing gains.
Russell Investments managing director and head of distribution in Australia and New Zealand Neil Rogan said: “Advisers are much more than financial experts – they are also behavioural coaches who help clients cope with the emotional rollercoaster of both investing and life itself.
“Advisers’ practical support also helped clients maintain strategies like dollar-cost averaging as rising inflation cut their disposable income.”
The value of an adviser equation used by Russell Investments in the report is calculated by adding together the estimated benefit of a practitioner’s guidance on asset allocation (1.1 per cent), behavioural coaching (3.3 per cent) and tax planning (1.3 per cent), with the firm adding the value of professional advice was priceless.
The report noted that during the past year, advisers continued to work with their clients to help them achieve their long-term financial goals and had to balance the competing emotions triggered by strong investment returns and a cost-of-living crisis.
“This counsel encompasses much more than investing. It requires in-depth knowledge of taxation, superannuation and social security, plus the understanding of human behaviour required to support people making life decisions,” the report said.
In regards to the added value figure, it noted: “This is substantially higher than the typical fee charged by advisers and a validation of the holistic service they provide to clients.”
Rogan said: “It’s important advisers continue to communicate their value to clients. This report shows that if an adviser can help clients avoid common behavioural mistakes, they likely provide value above and beyond their fees.”
