Financial Advisers Boost Client Portfolios by 5.9%

The expertise of financial advisers has been shown to make a substantial difference, with client portfolios seeing a 5.9% increase in value compared to those of clients without advisers, according to Russell Investments' 2023 Value of an Adviser report. This not only highlights the financial benefits but also underscores how advisers help clients navigate both the practical and emotional aspects of their financial affairs.

The report evaluated five key metrics contributing to this premium: behavioural coaching (3.4%), asset allocation (1.2%), tax planning and investing (1.3%), choices and trade-offs (variable), and the invaluable adviser's expertise (priceless). This year, the overall value added by advisers increased from 5.8% last year.

The fifth metric emphasises the combination of technical skills and emotional expertise, providing clients with a "priceless form of value." While technical skills are essential, advisers' ability to connect with clients, earn their trust, and employ interpersonal skills like empathy and curiosity, are equally critical to a successful relationship.

For example, a 12% value added to asset allocation can result in a client's retirement savings growing to $210,947 after ten years, an extra $21,818 compared to a default portfolio. Additionally, advisers can contribute another 1.3% in value through tax planning, ensuring that clients' portfolios are tax efficient.

Russell Investments' Managing Director and Head of Distribution in Australia, Neill Rogan, highlighted the importance of advisers' expertise in asset allocation, stating that a potential 1.2% in value achieved through careful asset allocation can significantly impact an investor's outcome. He also noted the opportunity for advisers to demonstrate their value further by emphasising tax effectiveness, as only 12% of investors prioritise this aspect when making investment decisions.