The Value of Financial Advice

How do you measure the value of financial advice?

The value of true and comprehensive Financial Planning is a hard thing to quantify. Success is subjective to the individual and it is difficult to know, over the longer term, if you would have been more successful taking an alternative course. However, research has shown that it does have real, tangible benefits, as well as being valuable in other areas too.

In depth research highlights the benefits of taking advice. Data was mapped over a period of five years and reviewed the impact of people seeking advice from three perspectives; changes in how investments were constructed; financial outcomes; and emotional wellbeing.

The study was based on investment portfolios between £190,000 and £390,000, and of the participants the median age was 65.

The results of the study showed the following:

·      Financial outcomes: When it comes to helping a client achieve their financial goals, the Financial Planner must consider a multitude of planning areas that extend beyond investing. These include saving; spending; debt management; budgeting; insurance and protection; risk management; various elements of tax-efficient retirement planning; and estate planning. All of these elements must work in harmony with each other in order to achieve the best outcome possible.

In terms of financial value, approximately 80% of the advised investors were found likely to reach their retirement goals. They found that 76% had a 90-100% probability of achieving their objective. Another 4% were 80-89% likely to achieve their goal. Put together, this means that eight in ten of advised investors had a probability above 80% of meeting their goal of a financially secure retirement.

·         Emotional outcomes: The value of advice cannot be assessed by purely quantitative measures. In a survey that was conducted, over 500 respondents found that the emotional or personal side of advice accounts for nearly half of the value obtained from advice. At BFP, we are passionate about providing this kind of peace of mind.

·         Portfolio outcomes: The research also found that advice led to meaningful changes for most to their investment portfolios. The most common change to portfolios following advice is the reallocation of cash and adding further diversification.  The majority also altered the balance between their holdings as they were reallocated in line with their attitude to risk, something which is very important especially when approaching retirement.

From a survey of 504 advised investors, it was apparent that many of the most highly rated statements were those with a significant emotional component. 'Trust in the adviser' was the most important factor driving the highest value rating, followed by having a 'personal connection with the adviser'. Feeling 'on track to meet goals' and 'reassured in down markets' were also significant.  Speaking to clients recently, these are certainly the sentiments that are shared.

Overall, statements relating to 'relationship with a trusted adviser' accounted for 55% of investor perceptions of value. Across the three categories, emotional value was rated at 45% and our clients tell us they feel reassured by the relationship we have with them and the work we do:

 “I am absolutely certain we would not be in the financial position that we are today without the help and sound advice provided by BFP over the years.  Using BFP has most certainly eased the uncertainties and worries that we both had about our future finances and we both without hesitation recommend BFP to anyone needing financial advice.”

Planning your financial affairs is one of the most important and personal things that you will undertake in your life.  It is imperative that you work with an adviser that you trust and who understands your goals along with your concerns.  True Financial Planning looks at all aspects of your life and plans accordingly. Without trust or the feeling of a personal relationship with their adviser, most investors are less likely to feel a sense of financial wellbeing.

If you would like to discuss how BFP can help you to obtain financial wellbeing, don’t hesitate to contact us to arrange a complimentary first meeting.

Information obtained from Vanguard Asset Management, Limited which is authorised and regulated in the UK by the Financial Conduct Authority.  Source: https://personal.vanguard.com/pdf/assessing-value-advice.pdf