Do I need a Financial Advisor?

Do I need Financial Advice?


When people think of what financial advice is, they sometimes associate a Financial Advisor as a person who simply picks the best investments for them, or how much greater an investment return they can make for clients with fund A over fund B. A Financial Advisor offers much more than this. An advisor’s mission is to close the gap between where you are financially and where you’d like to be.


For example, a Financial Advisor can provide valuable insight for how you should be managing your money to reach your financial goals at every crucial life stage, be it, buying your dream home, getting married, planning for children, advice when changing jobs, moving up in the workplace or starting your own business, and reaching your retirement goals. This in turn will help you make smarter decisions and avoid making expensive mistakes in life.


In addition, Vanguard released a research paper titled “Putting a value on your value: Quantifying Advisor’s Alpha” outlining the value-add, or alpha, through ongoing guidance, discipline, financial planning and relationship based approaches between the client and advisor. The findings reflected that with the help of Financial Advisors, investors gained around 3% per year in value for their investments over time, compared to what they would get if they had not used an advisor.



What is the value of a Financial Advisor?


The above is often supported by some of the below techniques that Financial Advisors use to help ensure that clients getting the most out of their investments or financial plans.


Cost Management:

One of the first questions that our Financial Advisors get asks on our first interaction with clients is, no doubt, “how much do you charge?” Notably, this is an important concern for clients and so fees and charges are always disclosed from the outset. Where we can, we help to reduce charges for clients as this makes a huge difference to their investments over time given that the slightest reduction could mean significantly higher investment return over a period of 10 years plus.


What is the value of a Financial Advisor

Portfolio Rebalancing:

There are also important benefits of working with a Financial Advisor that you wouldn’t otherwise get going at it alone, such as compiling the right mix of asset allocation in your portfolio (equities, bonds, property, etc) in line with prevailing market conditions. Here, portfolio rebalancing is key to ensure the client gets optimal investment returns during a certain period by taking profits from certain investments and topping others when required.


Assess your Attitude to Risk:

When engaging with clients, a Financial Advisor needs to listen, ask questions and really understand what clients are aiming to achieve. Sometimes this can be something quite simple, other times a more holistic financial strategy, nonetheless, a Financial Advisor will always assess your attitude to risk to make sure you are comfortable with the level of risk you would need to take on to achieve your investment objectives.


Behavioural Coaching:

Research suggests that behavioural coaching is the most valuable tool used by the Financial Advisor to help clients to “stay the course” of their investments and avoid knee-jerk responses to volatile market conditions. Investors commonly make the mistake of “selling low” when markets dip as a result of fear, and thereafter “buying high” when the markets begin to improve again as a result of greed. This can cost the investor dearly, and so we also advise to avoid market watching, stick to your annual financial review, and remain committed to your long-term investment strategy and objective.


The Vanguard report, as discussed above, suggested that funds under-performed by 3% due to poor decision making, and alternatively, with solid behavioural coaching, investors added 1.5% per year to their fund performance over and above advisor fees.


Financial Resilience & Security:

Financial education and advice is key to achieving financial resilience as you go through life. Here, a Financial Advisor can assist by helping you to withstand challenging life events that could impact your income and assets. Some of these financially stressful events can include the following; Unemployment, divorce, disability, income and health problems. Working alongside a Financial Advisor will help you to build financial resilience, have a more financially focused mindset, and achieve financial security.



Emotional Benefits & Well-being:


A recent published report by Royal London Group found that the top three emotional benefits of consumers getting financial advice are:

  1. Feeling more confident in their financial plans
  2. Feeling more in control of their finances
  3. Having peace of mindFinancial Advice is essential

In addition, the top three emotional qualities that customers value when it comes to a Financial Broker are:

  1. Quality of the advice and expertise
  2. Trustworthiness
  3. Communication


Outcomes of working with a Financial Advisor


1. Wealth: Advised clients build more wealth and have greater net worth over time.

2. Achieve your Goals: Those who work with Advisors are more successful at achieving meaningful goals.

3. Retirement Savings: Clients who work with Advisors are far more likely to have sufficient savings at retirement.

4. Confidence: Financial plans and advice will keep you better informed when making financial decisions and will leave you more confident in your financial future.



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