Financial advisers increase value during turbulent 2023


Neil Rogan

The potential value delivered by financial advisers to their clients’ investment portfolios has increased year on year to 5.9% in 2023, reaffirming the importance of advice in meeting long-term financial goals.

Released yesterday, Russell Investments’ sixth annual Value of an Adviser Report demonstrates why Australians rely on financial advisers to navigate the practical and emotional aspects of investing, especially in a year where rising inflation and the spectre of a global recession drove investor uncertainty and dominated headlines.

Neil Rogan, Russell Investments’ Managing Director, Head of Distribution in Australia, said: “For the past two years advisers have increased their value to clients, proving yet again why they are the trusted expert in the room that Australians desire when there’s uncertainty in domestic and global investment markets.”​

This year, advisers’ value increased one percentage point, up from 5.8% in 2022. Russell Investments calculates value by examining five components of advice delivery: behavioural coaching (3.4%), appropriate asset allocation (1.2%), tax savvy planning and investing (1.3%), choices and trade-offs (variable) and the value of an adviser’s years of professional expertise (priceless).

“Too often non-advised investors make rash decisions and change investment strategies when there needs to be greater consideration for the longer term. This is where advisers become just as much a behaviour coach as a financial coach. In 2023, behavioural coaching alone could contribute 3.4% to the value of investors’ portfolios,” Mr Rogan said.

​The value added on asset allocation was 1.2%, and the report highlights how clients with an advised strategy could benefit over the longer term. Asset allocation remains responsible for more than 85% of an individual’s investment outcome.

“Retail investors are more likely to recall individual stock performance rather than focusing on broader asset classes and the overall investment strategy. An adviser adds value by bringing a disciplined and sensible approach to meet their clients’ needs,” Mr Rogan said.​

“Non-advised Australians can find themselves in a single strategy super product lumped with other members and not really addressing their long-term financial goals. The potential 1.2% in value from an adviser achieved through carefully considered asset allocation can make a big difference to an investor’s outcome.”

An adviser with tax savvy planning and investing skills contributes another 1.3% in value, and this is crucial to ensure clients’ portfolios don’t unnecessarily leak funds. Given that only 12% of investors list overall tax effectiveness among their top three investment considerations when making investments[1], there’s an opportunity for advisers to further demonstrate their value.

“Investors need to look beyond their annual tax returns and recognise there are tax implications for many financial decisions now and into the future. Advisers can structure investment portfolios to be tax efficient and work through the complexities that come with tax planning, ultimately optimising their clients’ outcomes,” Mr Rogan said.​

The report shows a client’s wealth journey also extends beyond the quantifiable value provided by their adviser. Retirement planning, life insurance and social security are among many skills that advisers use in their toolbox. Advisers should also recognise the contribution they make to bridging the gap in Australians’ financial literacy.​

“Advisers act in many roles and are often guiding clients through their best and worst times in life. In many circumstances they are a sounding board, a voice of reason and an advocate. Beyond the technical skills it is vital that advisers are equipped to manage and communicate their value in building successful relationships and tailoring financial plans that give clients peace of mind,” Mr Rogan said.


[1] ASX Australian Investor Study 2023

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