The value of financial advice

A 16-year study by Vanguard Investments that found a financial adviser effectively adds around 3% to the value of a client’s portfolio over time.  This is on top of normal investment returns.

 

         

The real significance of this is that you can have a finance professional take care of one of the most important jobs in your life (funding your retirement) for very little, if any, real cost.  This can even be the case for those with smaller portfolios.

This benefit isn’t just from better investing, though that will often be the case.  It’s the more holistic approach that wins the day.  Vanguard Investments identify the following areas as those that will generate this positive outcome:

  • Suitable asset allocation
  • Cost-effective implementation (expense ratios)
  • Rebalancing
  • Behavioural coaching (Vanguard Investments found this to be the most significant contributor because there are some tasks people struggle with such as budgeting and expense management.  Behavioural coaching addresses this issue).
  • Tax efficiency (An example here is where an investor with a modest portfolio lost more than $250,000 in value over a 10-12 year period because they thought the three stock brokers they used were looking after tax related issues.  They weren’t!  If the planner had been involved sooner the outcomes would have been significantly different.)
  • Total returns versus income investing.

Finally, the concerns many potential clients have over the cost of financial planning means they delay getting help early enough which, in turn, threatens the very retirement outcomes they want to achieve. 

 

Peter Graham
PlannerWeb / AcctWeb

 

More Articles

Up to 700k retirees could be paying more tax than they should: SMC

Lack of proper financial advice is costing hundreds of thousands of retirees in unnecessary taxes, the Super...

Read full article

Best Selling BOOKS of all Time

Check out the Best Selling BOOKS of all...

Read full article

Calls for clarification on NALI/E rulings

The ATO needs to provide clarification on a number of issues in the law companion ruling dealing with NALI/E...

Read full article

How to shift into pension mode

When and how you can access your super to start an account-based pension. . If our working years can...

Read full article

Australia’s economic growth set to recover in 2025

GDP growth is set to gain momentum despite sticky inflation and high interest rates. . Vanguard...

Read full article

Five financial steps for the new year

The start of 2025 is a good opportunity to take decisive financial steps. . The new year can often be...

Read full article

Carer rights – interdependency relationships

The stringent rules applied to the definition of interdependency have again been highlighted in a recent...

Read full article

Division 296 deliberately deceptive

A senior financial services industry executive has labelled the Division 296 tax as political deception...

Read full article

Sofie Korac is an Authorised Representative (No. 400164) of Prudentia Financial Planning Pty Ltd, AFSL 544118 and a member of the Association of Financial Advisers.

Financial Advice Sydney and the North Shore Office based in Lindfield NSW

Financial Services Guide - Disclaimer & Privacy Policy

^