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2020 Value of an Advisor Report

2020 Value of an Advisor Report

November 16, 2020 |
Paul Horn

2020 was no doubt a year of significant disruption and change. Russell Investments have recognised the important role that advisors have played during this period in providing valuable support, guidance, perspective and connection – for more than just investment advice. Helping clients achieve their financial and personal goals is about making the right decisions in the short term and providing a steady hand in times of panic and crisis. The value of a quality advice relationship is about maintaining a long perspective. 

In their 2020 Report, Russell Investments examined the various components of an adviser’s value proposition and estimated that advisers deliver value of at least 5.2% or more every year to their clients beyond investment only advice. This tangible 5.2% is summarised as follows: 

  1. Appropriate Asset Allocation (0.9% p.a.): this is about people having the wrong investment option with no reference to their personal circumstances. An adviser brings the necessary skills to construct appropriate well diversified portfolios. 
  2. Behavioural Mistakes (2.2% p.a.): this is probably the most important attribute that advisers bring, it’s the behavioural coaching aspect of preventing clients from making stupid decisions.
  3. Cost of Cash (0.6% p.a.): advisers are able to appropriately utilise cash as we do with retirement cashflow needs and holding 3-5 years of pension payments in Cash & Fixed Interest. Getting this balance between cash and long-term growth is a real benefit provided to the client.
  4. Expertise = Priceless: very hard to quantify adviser expertise but where we deliver true wealth management is with:
    1. Disciplined decision-making frameworks 
    2. Increased confidence as a result of ongoing education 
    3. Providing perspective 
    4. For people who are time poor, they can partner with an adviser to create efficiency and take the effort out of creating their own investment solution 
  5. Tax-effective investing (1.5% p.a.): This is achieved through – 
    1. Structural tax strategies like salary sacrifice arrangements, transition to retirement 
    2. Portfolio strategies when we rebalance and consider the CGT implications 
    3. Accessing tax effective investments like managed funds which may not be available to the retail investor 
    4. Platform trading which calculates a tax position based only on the client’s portfolio 

The % calculated in the report is very subjective but it does outline tangible benefits that our advice provides. 

Paul Horn

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