Should I see a financial adviser? 5 valuable reasons why

November 11th 2022 | Categories: Should I See An Adviser |

Is a financial adviser worth it?

We believe almost everyone can gain from professional help. We also understand that using a financial adviser seems like a huge step. We know from experience that there are many tangible and intangible benefits that a great advice relationship can provide a client.

In this article we will cover the five key benefits financial advisers provide their clients. From appropriate asset allocation; preventing behavioural mistakes; making investors aware of the cost of holding cash; providing advice on tax-effective strategies; and offering expert knowledge plus wealth management services.

Russell Investments Director, Head of Business Solutions, Bronwyn Yates said “Our report shows advisers can play a critical role in helping investors avoid common behavioural tendencies and may potentially help their clients achieve better portfolio returns than those investors making decisions without professional guidance,” Ms Yates said.  

The financial adviser fees, are they worth it?

Bronwyn Yates recognises that some DIY investors and clients are wary of financial advice fees, questioning if they’re really worth it. When looking at the research, Bronwyn believes the fees are indeed worthwhile, with clients potentially gaining three times more in value.“Our report shows that an adviser charging an advice fee of $3,250 to a client with a $250,000 balance can potentially deliver $13,250 of value – that’s $10,000 extra value to the client.” She added.

From our perspective, that is only one piece of the value puzzle. The biggest gain our clients receive is peace of mind and clarity for the future. Additionally, you can rest easy knowing your wealth is protected should an unforeseen event happen in your family’s lives. But seeing the investment returns stand on their own only adds to the value equation.

By working with us, you will be clear about what is most important to you and where you are on the journey towards those dreams and goals.

Benefit #1. Proper asset allocation  85%¹

Many lack the skills, knowledge or time to research the various investment options out there and to clearly understand what would best work to achieve their objectives and needs.

A costly mistake a DIY investor can make is by not having an appropriate asset allocation when building their investment portfolio. Also add the temptation to chase performance, overreact to market events and succumb to the likes of FOMO (fear of missing out) type behaviour – these can impact one’s strategy and how you profit.

By having a financial adviser on your side, they bring the necessary skills to construct well-diversified portfolios, which is a key contributor to healthy long-term returns. They also have access to funds and strategies that everyday investors likely don’t have.

At Invest Blue, we recently launched a wealth management offering that brings institutional-grade investment opportunities to the families we work with. This is unique in the Australian wealth market and helps to bring the costs of actively managed investment portfolios down to an affordable level.  

CASE STUDY: Big differences in asset allocations

Reviewing the average returns of Australian equity and bond portfolios over a 20-year period reveals those who held 70 per cent of their portfolio in growth assets and 30 per cent in defensive had an average yearly return of 9.0 per cent.

But if you held just 30 per cent growth assets and 70 per cent in defensive, it would deliver an annual return of 8.1 per cent.

This is where it gets interesting… If you were a young investor (typically more risk-averse as found by Deloitte) and invested conservatively instead of the growth option, you would have missed out on an average of 0.9 per cent each year for 20 years.

On a $100,000 investment that’s over $85,000 missed.  

Benefit #2. Avoid behavioural mistakes

Emotions play a significant role in investing, and without the right mindset and technical expertise, you can get caught out by your own behavioural biases. That’s why financial advisers are important. They not only provide investment advice but behavioural coaching to guide you in the right direction to meet your long-term goals – especially during volatile periods.

For many investors, 2020 was their first experience of significant market drops and ongoing volatility. While volatility was somewhat dampened in 2021, it came back to the forefront in 2022.

These last two years have been a clear demonstration of the importance of remaining invested through thick or thin. An investor who fled for the exits in mid-March 2020 when the pandemic emerged, would have had a difficult time to find the best re-entry point, with no real market “dips” to take advantage of. Pulling out of the market when it is volatile can lock in losses and could lead to missing out on any subsequent rally.

Benefit #3. Cost of holding cash

You may think ‘cash is king’ due to the sense of security and planning certainty it provides. However, did you know that holding too much cash for too long can have a negative impact on your investment portfolio? Known as ‘cash drag’, this situation can limit your overall performance and prompt investors to miss out on potential growth opportunities. By sacrificing that growth today could mean fewer assets in the future and therefore less spending power over the longer term, particularly in retirement.

Financial advisers understand this and work with you to invest in a well-diversified portfolio that seeks to balance your liquidity and growth, suitable for your stage of life and goals.

Benefit #4. Expert knowledge (value is priceless)

When it comes to your financial dreams and goals, it’s comforting to know a professional has your back. With a financial adviser, you get access to this – expert knowledge, skills and the latest research to create a tailored plan to help you on your investment journey.

Firstly, you gain time back as advisers, and their broader team of experts cover hours administering your financial matters, evaluating the best strategy and researching various platforms, investments solutions and insurance providers available to you.

Secondly, they offer various wealth management services such as tax and estate planning, investment and cash flow analysis, retirement income planning, assistance with annual tax return preparation and one-off custom requests – you’ll gain valuable efficiencies in your personal life.

And finally, during stressful periods including redundancy, personal trauma and inheritance or business transactions, they can provide support and the expertise to help identify the best path forward. This is also the case with any legislative changes and tax treatment of super or other asset changes that can affect your portfolio.

Benefit #5. Tax-effective strategies

Tax is often considered the realm of the accounting profession. However, an adviser can also provide expertise in managing and optimising investment tax for their clients. The concept of investment tax isn’t just limited to what goes into a tax return. Investment tax can have an impact on an asset’s value or on portfolio returns, even though it may not always be seen. As a result, it can be difficult for investors to know how to be tax-effective in their portfolios.

Providing a more tax-effective approach to investing is an area where advisers can distinguish themselves and demonstrate some of the more specific advice strategies that can deliver real gains to clients.

We believe that the value of an adviser for Tax-savvy planning and investing is at least the sum of:

• Asset allocation – optimising assets and contribution strategies across superannuation, investment bonds and other tax structures
• Asset implementation – tax-effective investment strategies and maximising tax benefit opportunities.

Financial planners can assist in several ways, including structural tax strategies, managing client-driven trading, and making portfolio recommendations that are tax-efficient to you. They also stay up to date on relevant tax changes that can impact your financial position and work closely with accountants and solicitors on specific and complex matters, to ensure no unexpected surprises come tax time.  

So, is it worth seeing a financial adviser?

When you look at the above benefits and an extra 5.2 per cent in value per year a financial adviser can provide clients – it’s hard to argue. Long-term financial planning involves a lot of time, expert knowledge, constant research and a strong mindset to stay on track.

How we help our clients

At Invest Blue we understand this and are passionate about helping people live their best possible lives. That’s why our approach is focused on getting to know clients on a personal level, helping them to identify what is truly important to them, and then working with them to realise their dreams and goals for the future.

We have a strong team of professionals who, as well as having years of experience, have high levels of expertise and can provide tailored advice to steer you towards your desired financial position.

Speak with one of our trusted and accredited financial advisers today 

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What you need to knowThis information is provided by Invest Blue Pty Ltd. (ABN 91 100 874 744). The information contained in this article is of general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice regarding those matters and seek personal financial, tax and/or legal advice before acting on this information. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relation to products and services provided to you.