Ask the Experts – Valuing Financial Advice


We often say at Tribeca we love to answer the hard questions. Well one of the hardest that we’re often asked is how do we put a value on the financial advice we provide. Yes, we can point to quantifiable metrics like investment returns and so on. But value is so much more than just figures on a balance sheet, as advisor David Lofthouse explains in our latest ‘Ask the Experts’ series.

How do you quantify the value of financial advice?

There are a handful of quantifiable things you can point to, like moving a client to a more competitive investment, making sure their insurances are at the appropriate level, or that their super fund is performing strongly and aligned with their risk profile. You can easily put a value on these things.

What’s harder to value, but what I feel is far more priceless than an investment return, are the steps we can take alongside the client that offer long-lasting positive change. And a meaningful difference.

That’s things like shifting behaviours; helping a client become more aware of their spending habits can have a significant impact on improving their way of life. Or keeping a client accountable through supporting and educating them to build the life they want. Then keeping them inspired and on track.

It’s these aspects that are most important to us at Tribeca – and where we can provide the greatest value to our clients.

Like to see how industry experts put a value on financial advice? Read here

A report last year by global investment managers Russell Investments sort to put a value on financial advice. What did this reveal?

The report was able to conclude that financial advisors can add at least 5.2 per cent per annum in monetary value to their clients, even in difficult investing climates. In dollar amounts, if an advisor charges a standard fee of $3,250 to a client with a $250,000 balance, they can potentially deliver $13,250 of value – or $10,000 in savings.

But the real interesting revelation was that this value wasn’t just achieved through making sound investments. The key savings actually came from warning clients against making poor financial decisions. The example used in the report was if someone with an investment balance of $250,000 decided to sell to cash in March 2020, they would have locked in losses of more than $50,000 by the end of May. Whereas a client who was advised to stay invested during the volatility would have recovered almost $20,000 during that same time. Since then most returns are now in the black.

The key takeaway is an effective advisor can provide enormous value in coaching clients through difficult times; supporting them to ensure they don’t lose sight of their long-term goals. To be there to encourage clients to stick to the plan, make smart and informed decisions, and stay the course.

Download the full report from Russell Investments here

Do you have any real life examples you can share?

One of the aspects of my job I love the most is being a sounding board for my clients. In January 2020, one of my clients came across a business opportunity, which at the time was appealing as he was not getting fulfilment from his current job. He also wanted a better work/life balance.

We discussed the pros and cons. What became clear was that although the new opportunity offered a fresh challenge, it would bring a whole lot of different pressures as it involved setting up and running a new business. And in a field that wasn’t on his radar before. It was more of a knee-jerk reaction to his current situation, rather than a long-term solution aligned to his goals.

He decided against the opportunity. By March 2020, the pandemic had locked-down all of Australia and his potential business would have been severely impacted – not to mention his financial future given the money he would have needed to invest.

Later that year he secured a new job offering greater pay and far more satisfaction.

Our clients make these types of sliding doors decisions everyday. Saying yes or no to opportunities. Sometimes it’s in their best interest. But in some cases like this one, saying no can avoid a potentially disastrous outcome. Having these honest and brave conversations with our clients is what financial advice should be all about.

You can read more real life client stories here.

What other conversations are valuable to have with your clients?

I have a number of clients who are either in retirement or preparing for that stage of their life. For many, they’ve done the hard work and are in a position to relax and live life to the fullest.

For some, the best conversations I can have is to actually give them permission to enjoy the freedom they’ve earn’t. That may sound funny, but when you’ve been disciplined with your savings and financial planning over a long period of time, and then face times of uncertainty, you can become naturally over cautious with your money.

Where we can help is to provide the reassurance that everything will be OK, and that we’ve planned for the good times, as well as the bad. Spend that extra $10,000 on renovating your kitchen because it’s going to improve your lifestyle at home. Treat yourself to fly business class for that next trip because it’s something you’ve always wanted to do. It’s giving them the peace of mind that they can live the life they want to live.

That’s incredibly fulfilling to be in a position to do that. To have moments where you can make people feel comfortable and safe – especially during the challenges of COVID.

To me that’s real value.

If you would like to talk to us about any aspect of your finances or lifestyle, we’re always ready to chat. Please talk to your advisor or arrange an appointment with one of our Tribeca Tribe here.

Would you like to read more from our experts? You can by clicking on the following links for our Ask the Expert articles on creating cashflow, financial wellbeing, cashflow coaching, career transition, superannuation, lending and the recession.

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