We know advisers offer substantial value to their clients, but most of this intricate work happens behind the scenes, making it hard for clients to appreciate. Our Value of an Adviser Report and tools are designed to help advisers articulate and investors understand the full value of an adviser's services.
The Value of an Adviser formula
Our formula breaks down the overall value of the services offered by a typical financial adviser.
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A glimpse of our report.
is for Appropriate Asset Allocation
Despite being at the heart of every investment strategy, determining over 85% of an individual's investment outcome,1 asset allocation remains the most overlooked element of financial advice by the public. Retail investors tend to focus on returns of individual stocks – such as this year’s gains from this year’s top AI stocks – rather than appreciating how asset allocation provides the essential framework for overall risk-adjusted returns.
Russell Investments’ analysis shows that carefully considered asset allocation, which takes into account the needs of an individual can add value of up to 1.1% per annum.
1 Russell Investments Making Super Personal White Paper 2020
is for Behavioural coaching
Advisers are much more than investment experts – they have an equal role to play in helping clients navigate the emotions that can cloud financial decision making.
Already in this decade we have seen COVID-19, global conflict, the US banking crisis, surging interest rates and a cost-of-living crisis – all of which have tested people’s fortitude as markets fell temporarily lower.
Advisers, however, have played a crucial role in ensuring people understand that the old adage that an investor with a properly constructed portfolio can weather such extreme periods of volatility.
is for Choices and trade-offs
The role of advisers as financial coaches – offering comprehensive wealth management beyond just investment selection – is often underappreciated. Yet, with increasing complexity in regulation, family situations and social security, their guidance is becoming increasingly crucial.
As clients progress through various life stages, from accumulating assets in early adulthood, to focusing on other considerations in middle age, and finally managing their affairs in older age, the nature of their financial needs evolves.
Over the next 40 years this will become even more relevant, with the 2023 Intergenerational Report forecasting the number of Australians aged 65 and over will more than double. Those aged at least 85 are expected to more than triple and the number of centenarians is set to increase six-fold.2
is for Expertise
Advisers’ skills extend beyond financial matters. They are also specialists in human behaviour who forge trusted relationships with clients that are necessary to deliver on their recommendations.
In good times, advisers help clients achieve life-long goals and celebrate personal milestones along the way. But they also support people in challenging times – through trauma, financial crises, job loss, illness and death.
This unique combination of technical skill and emotional expertise demonstrated by advisers provides a priceless form of value to their clients.
3 Australian government national financial capability survey 2021.
T is for Tax-effective investing and planning
Tax expertise sits alongside market knowledge and estate planning as among the central pillars of financial advice.
While it is perhaps most obvious in superannuation due to the potent tax-effective investment strategies advisers can use for working age clients, it is required to deliver on all aspects of the services that advisers offer –including investment strategies and social security assistance.
Communicating adviser value
Continued geopolitical uncertainty, market volatility and a cost of living crisis provide an ideal time for advisers to reassess the full value they offer to their clients – and in turn to communicate it to them clearly.
This is the premise behind Russell Investments’ simple Value of an Adviser formula. It was developed to showcase the diverse sources of value advisers generate in an easy-to-understand formula for the average person.
In times of uncertainty, advisers have helped clients to stick to planned investment strategies and navigate other areas of their financial affairs.
But once additional services are factored in – asset allocation, expertise, and tax planning – the total value of advice is clearly significant. And in many instances priceless.
Client relationships are your most valuable assets
Additional resources to help shape your conversation with clients.
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