Does a Financial Planner add value?

By Sunshine Coast Financial Planner, Mike Beal | July 10, 2024

According to research from Russell Investments (https://russellinvestments.com/au/about-us/press/2020/in-challenging-times-financial-advisers-still-deliver-value), the value of an adviser can be calculated at up to an additional 5.2% p.a. in returns. This is based on the ‘A, B, C, D, and T’ as follows:

A is Appropriate asset allocation. Helping clients to work through their values, preferences. The asset allocation, i.e. how much you invest in the different types of investments such as cash, bonds, property and shares makes a huge difference to your returns and the level of volatility or risk.
B is for Behavioural mistakes. Helping clients avoid common behavioural tendencies may help achieve better portfolio returns than those investors making decisions without professional guidance. Your Sunshine Coast Financial Advice team helps you along the journey.
C is for Cost of cash. Holding too much cash can come at a cost. Advisers can assist clients in investing in a well-diversified portfolio that seeks to balance the needs of liquidity and targeting growth within the risk levels appropriate to our clients.
E is for Expertise. A common misconception is that financial advisers are purely investment managers, whose only job is to select investments and achieve a certain level of return – quality financial advice goes way beyond this.
T is for Tax-effective investing. Advisers play an important role in a client’s tax journey, helping them navigate key components when it comes to tax-efficient strategies.

Sometimes being a financial adviser is about making sure our clients don’t do the things…that they often know they should not do! For example, selling investments when there’s a crisis, whether it be Covid or the GFC or the tech wreck – the time to buy is invariably when every headline is screaming Armageddon – these are not the times to sell! Research by Dalbar (www.dalbar.com) shows that individual investors under-performed the market by over 3.5% p.a. over a period of 30 years until 2021. Recent research has shown that this underperformance has only increased. Why? Human emotions! Because human emotions don’t tend to change, it’s highly likely that this under-performance will continue whereby people sell at times of maximum pessimism and buy at times of exuberance. It’s quite a frequent occurrence during corrections and crashes for us to receive calls from clients saying they wish to withdraw their investments or sell down the sectors that have performed poorly. We add a lot of value by simply being there and making sure our clients are not unduly influenced by their own emotions. Your Sunshine Coast Financial Advisor, Mike Beal, has over 3 decades of experience in investment market cycles.