These days we’re obsessed by value — not just businesses, but individuals too. We all want to make the most of the financial resources at our disposal.
There is however a danger in constantly looking at value in purely monetary terms. In other words, how much will it save me, in dollars, to buy this particular product or service as opposed to that one. For wealth services it can be difficult to assess value as the potential benefits are likely some combination of tangible services and potential intangible benefits.
There are studies showing that people with advisers amass more financial assets than those without. A 2017 report by the International Longevity Centre compared the wealth, in 2014, of two groups of people; the first received financial advice in the period 2001-2007 and the second didn’t.
The researchers found that the “affluent but advised” had accumulated on average 17% more in liquid financial assets than the “affluent and non-advised” group. The contrast was even starker among the less well-off. The “just getting by but advised” accumulated on average 39% more in assets than their non-advised peers.
Research by Vanguard Asset Management shows that a good adviser can add, on average, 3% a year to the value of a client’s portfolio. About half of that value, Vanguard calculates, comes from on-going behavioral coaching. Compounded over several decades, that can make a huge difference.
But studies such as these only tell part of the story about the value that an adviser adds. In fact, managing your investments is a relatively small part of what a modern wealth services provider does.
The true value of wealth services centers around the following:
1) helping you identify your priorities and establish goals; 2) producing a plan that reflects your priorities and maximizes your chances of achieving those goals; 3) reviewing and adjusting your plan as, inevitably, your personal circumstances change, and 4) ensuring that you stick to your plan and don’t allow your emotions or biases to cause you to deviate from that plan.
It’s important that someone with a proper specialized expertise asks you difficult questions that many of us go through life avoiding. For example, is your work quite as important to you as you say it is? Would you like to spend more time with your children or grandchildren? Do you really want to buy a bigger house or would it make you happier to shift your financial resources in a way that increases your time spent on family, or perhaps give it away to people who need it more than you?
Something else that an adviser can do for you is to work out how much money you actually need. There’s little point in spending extra time on things you don’t want to do or taking extra investment risk to accumulate wealth for the sake of it. Many people think they should keep on working until a certain age because that’s the norm or that’s what their parents did. But it may be that you already have enough money to retire now, if your adviser puts an appropriate wealth and investment plan in place.
Rethinking how you want to spend your time or answering the question how much investment risk should I take can be an unnatural thing in isolation and is likely best done through someone thinking about it and helping others through similar processes.
One last thing. Ask yourself, how precious is your time? Yes, you could probably write a perfectly good wealth plan yourself; you could, fairly easily, put together your own investment portfolio; and you could probably work out for yourself how much money you need to retire on.
By the same token, you could probably redecorate your house or learn how to service your car. But is that really what you want? Wouldn’t you rather spend the time doing something you actually enjoy?
Today, neither an advisor nor the head of a financial household should be doing this work. Technology can and should be doing this heavy lifting making it easier in the end.
Modern wealth services driven by technology can offer all the benefits of in-person advice and expertise without unnecessary costs.