Does it pay to seek advice?

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October 16 2020
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Industry research has found that advisers generate an average 5.2 per cent more for their clients due to asset allocation and behavioural coaching.

Russell Investments’ Value of an Adviser report found that advisers deliver value in five categories that go beyond investment advice, including asset allocation, correcting behaviour mistakes, adequately managing clients cash holding, setting and monitoring goals, and helping with tax structures.

Russell Investments director, head of business solutions, Bronwyn Yates said advisers have shown their worth during challenging times, including during the current COVID-19 pandemic.

“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,” said Ms Yates.

The report found that advisers generated an average 2.2 per cent per year for clients through ensuring they bought and sold assets at the correct times in the market cycle, and 1.5 per cent through ensuring investments were made in tax-efficient structures such as super and transition to retirement.

A further 0.9 per cent was generated through asset allocation basics such as selecting the correct investment option in the client’s super fund, and 0.6 per cent by diversifying a client’s cash and fixed income holdings.

Russell Investments also observed that during the pandemic, many investors were so fearful of loss as markets fell that they switched predominantly to defensive assets or entirely to cash just prior to the market hitting its 17 March low, locking in substantial losses.

Using the example of an investor with $250,000, the report found that selling to cash on 16 March would have locked in losses of more than $50,000 versus a member with the same balance who stayed invested during the volatility, recovering almost $20,000 already by the end of May.

Russell Investments head of wholesale partnerships Neil Rogan also pointed to savings made through tax-effective recommendations.

“Tax-effective investing was the next biggest contributor, representing 1.5 per cent of added value. While tax is often considered the realm of the accounting profession, an adviser can also provide expertise on managing and optimising investment tax for their clients,” he concluded.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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