The Evidence-Based Investor

Four ways an adviser adds value – 1. Asset Allocation [Video]

Posted by Robin Powell on April 26, 2016

Tempting though it may be to manage without a financial adviser, most people are much better off using one than not using one over the long run. And I really do mean better off.

There are several reasons why people choose to use an adviser. On a practical level, they’re generally busy and don’t have the time to spend on managing their finances themselves. Perhaps more than anything, investors want peace of mind.

But there are also significant financial advantages to having a good adviser. Yes, advice does add a layer of cost, and it’s extremely important, whoever you choose to work with, that you ensure they’re providing you with real value for money. But a good adviser will repay his or her fees in spades.

Research by Vanguard has actually quantified the value an adviser adds at around 3% in net returns per year. Compounded over decades of investing, that sort of figure makes a vast difference to the eventual size of a client’s retirement pot.

Principally, there are four main areas in which an adviser adds value, and the first is in setting a suitable asset allocation.

Investors are rewarded for the amount of risk they take. But because we’re all different, we all have our own attitude to risk. Also, depending on their age or financial situation, some may need to take more risk than others; and some are less able to take risk than others.

It’s up to an adviser to work out just the right amount of risk for the client and then to build a portfolio that strikes a perfect balance between riskier assets such as equities and less risky ones, like bonds or cash. The adviser should also ensure that the portfolio is well diversified. The aim is to provide the investor with the highest possible returns for the level of risk they choose to take.

Finding the right asset allocation will take time and will involve some in-depth conversations between the adviser and the client. But it’s very important. Get it right, and you’ll give yourself the very best chance of achieving your financial goals.

 

This video on asset allocation is the second in a five-part series of videos called The Value of Advice, made by Regis Media, which produces and sponsors The Evidence-Based Investor. The videos are intended for use by advisory firms to help them communicate their worth to clients and prospective clients.

If you’re an adviser, and you would like your own version of the series, in your firm’s branding and carrying your contact details, and perhaps a call-to-action and disclaimer, please get in touch with Sam Willet at s.willet@regismedia.com or Christina Waider at christina@regismedia.com. Alternatively you can call us on +44 (0)121 285 2585.

The Value of Advice is one of three pre-produced video series currently available to advisers, the others being Six Steps to Successful Investing and Evidence-Based Investing Insights. All three series have been tailored to different markets — principally the UK, Ireland, the US, Canada, Australia and New Zealand. They are also available in Dutch and in German.

 

NEXT TIME: The second way an adviser adds value — cost control

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Robin Powell

Robin is a journalist and campaigner for positive change in global investing. He runs Regis Media, a niche provider of content marketing for financial advice firms with an evidence-based investment philosophy. He also works as a consultant to other disruptive firms in the investing sector. Regis Media.

Disclaimer: All content is for informational purposes only. I make no representations as to the accuracy, completeness, suitability or validity of any information on this site and will not be liable for any errors or omissions or any damages arising from its display or use. Full disclaimer.