The value of financial advice
Contents
The Value Factor
The cost of financial advice is a key factor to consider. How do you determine the value you’re receiving?
It’s a great question, and one your financial advisor should be able to answer.
At Tribeca, our goal is to deliver 4-6 times our fees in value to you. approach is to look at your life through a holistic lens that goes far beyond financial statements and returns. It goes to what is most important to you in order to live your Good Life. It’s about creating value that enhances your finances as well as your sense of security and freedom to make choices.
So how do we prove our value? Firstly, we look at what the independent industry research tells us, which shows financial advisors consistently add 5.9% p.a to a client’s circumstances. This considers both quantitative (asset allocation, behavioural and tax) and qualitative benefits (choices and expertise). You can read more about that here.
Using this as the benchmark, we then overlay the unique value and support we can bring in helping you achieve your Good Life goals and aspirations. It’s how we arrive at the Value Factor; our goal of delivering 4-6 times our fees in value to you.
Here’s a real-life example to show the Value Factor in action.
Background
Our client was a single woman aged 65, who was left with a mortgage after a separation settlement and no surplus income to enjoy her Good Life. Her initial question to us was how much she could draw from her superannuation for a home changeover (sell current home, clear debt, buy a new home with no debt).
Solution
By gaining a full understanding of her circumstances as well as what she values most, we created a holistic plan that accommodated not just the current home situation but importantly her future needs and goals. This comprised:
- Commencing an account-based pension with her existing super fund and retaining a small balance going forward to receive a retirement bonus (a free deposit into the account) of $5,847.
- Changing her super fund and switching to an index investment strategy. This resulted in a fee saving of $5,368 p.a. and better long-term historical performance by 1.33% p.a. without increasing exposure to growth assets (same risk, lower fees, better historical performance).
- Moving to a re-contribution strategy which will save up to $84,453 in potential death-benefits tax to any non-dependent beneficiaries (e.g. adult children).
- Making a tax-deductible super contribution of $10,000 which reduced her overall tax by $2,400.
- Cancelling insurance that was no longer required, saving $3,224 p.a. in ongoing premiums.
- Generating financial modelling scenarios to show the impact of drawing on her super to fund the new home. One scenario was included to show the amount she was likely to need, and another was included to show the maximum she could draw from super for her new home without impacting her retirement needs.
Outcome
The Value Factor generated from these changes was significant. From a financial perspective, in the first twelve months alone we returned a benefit of approximately $16,800 (not to mention the ongoing compounding impact of this). Our superannuation modelling and adjustments also enabled her to meet her pressing home requirements, as well as enjoy a new fund offering stronger performance more aligned to her needs. From an emotional perspective, reducing the potential death benefits tax her children would have to pay took an enormous weight off her mind. As was knowing that her short, medium and long-term goals were achievable.
To learn more about how we balance fees with value, click here.
And to see the full range of services we offer and the value we provide, click here.