Advised clients portfolios gain 5.2% over non-advised peers
Investors who received financial advice during the pandemic market volatility have seen an extra 5.2% per annum in returns as a result of that advice.
The fourth Russell Investments ‘Value of an Adviser’ report said preventing behavioural mistakes, advising on asset allocation, optimising cash holdings, tax-effective investing and planning and expert knowledge were benefits of using an adviser.
It was important that advisers clearly stated the benefits of these intangible qualities to clients as well as their ability to put their money into products as factors such as the correct asset allocation was worth 1.1% to a client’s portfolio.
From the start of 2020 to the 31 May, 2021, investors who had a portfolio with a value of $250,000 gained as much as $40,000 by staying in the market instead of switching to cash.
Exiting investments was cited as the most critical mistake made by non-advised investors as they later found it difficult to re-enter the market.
Bronwyn Yates, director and head of business solutions at Russell Investments, said: “Investors that have been educated by a financial adviser understand there will be ups and downs along their financial journey, so they feel comfortable in staying the course.
“However, non-advised investors struggle to make the correct decision when markets are volatile, and often attempt to time the market. This is an issue which plagues both those with loss aversion, and those convinced they can beat the market. It’s also a timely consideration for the growing ranks of millennials and Gen Z turning to fin-fluencers as their source for financial advice.”
AUTHOR
Laura Dew
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