Should I work with a Financial Planner?
Unlocking the True Value of a Financial Planner: More than Just Managing Investments
Written by David Rosbotham DipPFS | Financial Planner | Feb 24
In a world driven by financial uncertainties, navigating the complex landscape of personal finance requires more than just picking the right investments. The value of a financial planner extends far beyond the realm of managing portfolios, as revealed by a 2019 report from Russell Investments and a study by Vanguard. In this blog post, we delve into the key insights of each report and shed light on why working with a financial planner can be instrumental in securing your financial future.
Quantifiable Value Beyond Investment Returns
The report from Russell Investments highlights that the quantifiable value of a financial planner's services goes far beyond investment returns, standing at a minimum of 4.4% of invested funds. This substantial figure underscores the multifaceted role financial planners play in shaping the financial well-being of their clients.
Key Drivers of a Financial Planner's Professional Worth:
Behavioural Mistakes (1.9%): One of the primary roles of a financial planner is to assist clients in avoiding behavioural mistakes. Emotional decision-making can have detrimental effects on investment outcomes. By providing guidance and a rational perspective, financial planners contribute significantly to preserving and growing clients' wealth.
Cost of Getting it Wrong (1.6%): The report identifies the cost of making financial mistakes as a significant driver of a financial planner's value. For expatriates engaged in cross-border financial planning, this figure is likely to be even higher due to the unique challenges associated with international financial management. Financial advisers act as strategic partners in helping clients navigate potential pitfalls and avoid costly errors.
In addition, Vanguard’s independent study found that “Based on our analysis, advisors can potentially add up to, or even exceed 3% in net returns”. Other studies confirm these findings. For example, a study on retirement readiness from Dalbar found that the average Do-It-Yourself investor was THREE times more likely to not have an estimate of what they will have saved at retirement age.
Financial Planning Goes Beyond Picking Funds
Contrary to common misconceptions, financial planning is not solely about selecting the right investment funds. The intricate web of financial decisions involves considerations such as tax planning, risk management, retirement planning, when to access your pensions, and more. Financial planners serve as holistic guides, steering clients through the complexities of financial planning to achieve comprehensive and sustainable financial success.
Do I need a financial planner?
When pondering the justification of a financial planner's fees, it's crucial to recognise the diverse aspects of financial planning that go beyond managing investments.
The Russell Investments report highlights the concrete and measurable worth that financial planners contribute, emphasising their role in minimising behavioural errors and preventing the substantial costs linked to financial misjudgements. When reflecting on your financial approach, bear in mind that collaborating with a financial planner involves more than simply fund management; it involves crafting a resilient and comprehensive financial future aligned with the lifestyle you aspire to achieve.
Useful Articles
"Does a Financial Adviser add any value"
"Putting a value on your value: Quantifying Advisors"
"Do-It-Yourselfers Lack Key Retirement Info"
https://www.fa-mag.com/news/study-finds-do-it-yourselfers-lack-key-retirement-info-64217.html
Partnering for Financial Success
Are you curious about how financial planning can add value to your financial journey? Take the first step towards securing your financial well-being by reaching out to us today.
We invite you to schedule a free, 30-minute introductory meeting with our experienced planner, David Rosbotham. Or find out more about our approach to financial planning.