While many people who receive financial advice can testify to its value, it seems that it’s always been quite difficult to quantify.
However, two new research reports, one in New Zealand and another in the UK, reveal more evidence that it’s prudent to engage the services of a financial adviser.
In New Zealand, Russell Investments has produced a new report that shows New Zealand investors’ portfolios are more than 5% better off with help from a financial adviser.
The firm has examined the value of financial advice in the United States and Australia, and has recently completed its New Zealand version of the research.
The report shows that much of the value an Adviser brings includes helping a client: avoid “getting it wrong”, averting behavioural mistakes, and annual rebalancing.
In an article featured on financial news website Good Returns in late November, the report said: “This comes down to advisers having a thorough understanding of their respective client’s goals and risk tolerance as well as the implicit and explicit costs involved. The examples shown, illustrate the value that a disciplined rebalancing approach can add both in terms of risk reduction and return enhancement.”
“Behavioural mistakes were hard for independent investors to catch. Behavioural change begins with personal awareness of their investing behavior and of the investment biases that may be causing their mistakes. Once clients are aware of these biases, the adviser can be that accountability partner to help them stay on course.”
The report also says there is evidence financial advisers help make the whole process of investing simpler.
Meanwhile, for people in the UK, new research published in late November by Royal London and the International Longevity Centre (ILC) think-tank, reveals those who take financial advice are better off in retirement than those who don’t.
Titled “What it’s worth: Revisiting the value of financial advice” ILC’s latest research says: “holding other factors constant, those who took advice around the turn of the century were on average over £47,000 better off a decade later than those who did not”.
Other findings showed that fostering an ongoing relationship with a financial adviser leads to better financial outcomes.
ILC Director David Sinclair said at the release of the report: “The simple fact is that those who take advice are likely to be richer in retirement. But it is still the case that far too many people who take out investments and pensions do not use financial advice. And only a minority of the population has seen a financial adviser. We must now work together to get more people through the front door of advice.”
Read the full Good Returns article here: www.goodreturns.co.nz/article/976515965/using-an-adviser-adds-more-than-5-to-a-client-s-portfolio.html