The right words of advice – whether it be from friends or family, a business mentor or sports coach – can have lasting impact on the way we lead our lives or manage our businesses. The same holds true for financial advice.
The right advice can deliver more than just a better investment outcome. Think peace of mind heading into retirement, lower stress in a relationship and possibly even higher levels of happiness.
The Financial Services Council recently released a research report titled the Future of Advice prepared by the independent research and actuarial firm Rice Warner[i]. While the report is aimed at advancing the public policy debate on the financial advice industry it contains some strong learnings for individual investors.
The report rightly identifies the challenges consumers face in managing their financial position without some support and points to the need for advice in order to maximise income, avoid poor decisions and financial difficulties. A task made harder by the complex interplay of markets, products, legislation, tax and super rules. It goes on to say that “many people need advice because of a lack of knowledge, confidence or experience, or a combination of these and receive significant psychological benefits from being and feeling more in control”.
The research has modelled a range of cameos to assess the value of advice and estimates that those who obtain advice accumulate more than three times more assets after 15 years than those who make their own decisions (including doing nothing).
That is a significant financial payoff and is in line with proprietary research by global firm Vanguard titled Adviser’s Alpha[ii] that independently researched the impact of advice and estimated the value about 3% in improved annual net returns.
The Rice Warner research makes a strong case for the tangible, financial benefit of getting advice.
The report states that beyond the quantifiable benefits, professional advice adds value through improvements to quality of life. This is supported by research produced in 2019 which identified that advised individuals perceived the emotional aspects of an advisory relationship to represent 45% of the total perceived value of advice. Amongst the added benefits, studies have found that:
To find out more about how any of these measures may be of assistance in your individual circumstances, please contact Gordon Thoms or David Conte at Calibre Private Wealth Advisers on ph. (03) 9824 2777 or email us here.
[i] Future of Advice – Research Paper, Rice Warner (August 2020)
[ii] Advisers Alpha – Vanguard Research (2018-2020)
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