Putting a value on financial advice

Putting a value on financial advice

Table of Contents

How do you put a value on financial advice? It’s a common question, especially in 2020 with the economy turned on its head due to the global pandemic. Rather than provide our personal view, we thought we’d see what conclusions can be drawn from a number of global and local research studies that have looked at this question throughout the pandemic.

The 2020 ASX Australian Investor Study found that out of the one in five Australians who have engaged a financial planner (the majority being in the 33-55 accumulator age group), 87% of this group did not dip into their superfund at all during the early super release scheme. These accumulators have also not been impacted as badly financially as those without a financial planner.

Further, 84 per cent of investors who sought advice during COVID-19 found this advice helpful, and a further 17 per cent of investors are more likely to seek advice after the pandemic.

These figures are also backed up by statistics from the FPA Money & Life Tracker (COVID edition), which indicate 13% of Australians are considering seeking financial advice to strengthen their financial position post COVID-19. It also showed that nearly half (49%) of financial planner clients claimed to have increased engagement with their financial planner during the virus, either when the stock market crashed in March or to seek reassurance on their finances.

The stock market volatility itself is an interesting window into the value of seeking sound, financial advice.

A recent report from US investment giant Russell Investments studied the impact if shareholders chose to sell to cash during COVID. “For someone with an investment balance of $250,000, selling to cash on March 16 would have locked in losses of more than $50,000 versus a member with the same balance who stayed invested during the volatility, recovering almost $20,000 already by the end of May,” the report stated.

A similar theme is reflected in the ASX Study, which revealed 68 per cent of advised investors made changes to their portfolio as a result of COVID — but rather sell like many panicked shareholders, they were advised to buy. Of those, 41 per cent said their advisor had been “extremely” or “very helpful” in managing the impact of the downturn.

So apart from placing a value on good and helpful financial advice which is obviously important, is there a monetary value you can place on the worth of an advisor?

The Russell Investments report has attempted to quantify this value. It concluded 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. This value gained is not just through recommending sound investments and strategies, but in warning off against potentially damaging decisions like selling off shares.

Based on these figures, it’s not surprising that an FPA CoreData report revealed that during the height of the pandemic in Australia, there was an 11 per cent increase in clients more likely to recommend their advisor to family and friends. And despite all of the uncertainty over the year, trust between client and financial planner remained stable and high.

So what does all of this research tell us?

  1. The positive attitude and value towards financial advice in Australia indicates that the sector has begun to restore peoples faith following the Royal Commission
  2. Financial advisors have proven critical in a crisis through guiding the financial interests of clients during the pandemic
  3. Due to this response, it is likely more people will seek the help of a financial advisor following COVID
  4. The value provided from financial advisors can be measured both from a wellbeing and monetary perspective
  5. The overall consensus from the findings? A trusted, good financial advisor is worth their weight in gold

At Tribeca, every day we look to add value to our clients for the now – and for the future. And we’re always happy and open to explain what’s important to us and how that’s reflected in the way we work with our clients.

We’re also here to chat about any aspect of your financial wellbeing. You can talk to us at anytime by contacting our Tribeca Tribe

Share this post
Read more of our latest articles
Photo by Pat Whelen for Unsplash
Financial Advice
How does mortgage lending work?

According to leading industry researcher IBISWorld, the market size of Australia’s mortgage industry (measured by revenue) was $62.8bn in 2022. This equates to around 100 lenders servicing just under 20 million clients around the country.

Tribeca Financial Tribe
How to make a four-day week work

In 2021, Tribeca’s leadership team realised things needed to change – not just for the sake of the business but for the finance industry as a whole.

The impact of the pandemic together with an ever-increasing scrutiny on governance and qualification levels had seen a dramatic drop-off in financial advisers remaining and entering the industry.