Advisers continued to be extremely valuable to their clients in 2022 as investors faced prolonged market volatility, Russell Investments’ fifth annual Value of an Advisor report has demonstrated.
Published on Wednesday, the report, which quantifies the value of a financial adviser, revealed that Australians with a financial adviser are 5.8 per cent better off than non-advised investors.
“The past two years have been challenging for investors, with many facing these prolonged levels of volatility for the first time in their investing lives. As a result, many investors have turned away from investment markets, seeking shelter in assets like cash which they believe to be safer,” said Neil Rogan, Russell Investments head of adviser and intermediary solutions in Australia.
Russell Investments’ overall score of 5.8 per cent is a sum of the value advisers provided across five vital services they offer, including behavioural coaching; appropriate asset allocation; tax-savvy planning and investing; choices and trade-offs; and the value of an adviser’s years of professional expertise.
According to Mr Rogan, over the past 12 months, behavioural coaching encompassed an adviser’s ability to help their clients remain invested through the turbulence, preparing them for an uncertain future and working with them to determine their post-pandemic goals.
“This year, that aspect of an adviser’s role alone is responsible for 2.9 per cent of portfolio value,” Mr Rogan said.
Regarding asset allocation, the investment manager explained that while this area of an adviser’s role is responsible for more than 85 per cent of an individual’s investment outcome, it is often undervalued and underappreciated.
“We believe that being in an asset allocation that is appropriate to an individual’s personal needs, as identified by their adviser, can be worth up to 1.6 per cent p.a. in annual portfolio value, particularly in periods of market instability such as those investors are currently experiencing,” Mr Rogan said.
The remaining 1.3 per cent of quantifiable adviser value is drawn from tax-savvy planning and investing.
While commonly considered the responsibility of accountants, Russell Investments highlighted tax considerations as an important part of the advice process, with 23 per cent of investors said to consider tax effectiveness as one of their top three investment concerns.
“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 value to their clients,” Mr Rogan said.
“The technical expertise required to minimise a tax position through super is confusing and daunting for clients, but for financial advisers, it’s a consideration they make every day to optimise their clients’ outcomes.”
Moreover, the report found that an adviser’s contribution to the success of their client’s wealth building journey is “priceless”.
The investment manager noted that while just over 55 per cent of Australians are considered financially literate, 83 per cent of advised Australians report feeling peace of mind about their future.
“The value of an adviser isn’t limited to their positive portfolio impact. Advisers are experts at simultaneously incorporating their emotional expertise into their technical capabilities, to help clients overcome periods of immense personal and family challenges such as trauma, illness, and death,” Mr Rogan said.
He concluded that these “tangible, but non-quantifiable” qualities also extend to how advisers help their clients synthesise the myriad combination of personal goals, circumstances, preferences and considerations into a cohesive plan to provide their clients with financial certainty.
Russell Investments boasts $435.1 billion in assets under management (as of 30 June 2022) for clients in 31 countries.
