| If you have ever wondered whether the 1% fee you pay your advisor is worth it, rest assured you are getting a great deal. In fact, according to a study by Russell Investments’ Canadian Financial Advisors are worth 2.88% – almost 3x that amount. When determining an Advisor’s value Russell Investments analyzed five key areas. Managing Investor Behavior Acting as a behavioral coach is the single largest contributor when valuing your advisor. Over the past 20 years an investor’s inclination to chase past performance has cost them just under 1% per year. Thus, your advisor’s ability to keep you focused on your long-term goals and stop you from making irrational investment decisions is worth .90% to your bottom line. Tax-Smart Investing The average Canadian family currently spends more of their hard-earned money on taxes than they do on necessities like groceries, housing and clothing combined. Having your advisor suggest you invest in tax-efficient solutions like Corporate Class Mutual funds or determining which is better an RRSP or TFSA for your situation; can add 0.63% to your portfolio. Additional Services Provided If you had to pay separately for services like Retirement Planning, Estate Planning advice or Cash Flow Analysis you would be shelling out thousands of dollars. An advisor who includes these services as part of their package adds an additional 0.75% in value. Rebalancing Portfolios The constant monitoring and rebalancing of your investment portfolio has the potential to increase your annual return by up to 0.20%; furthermore, this rebalancing can reduce your risk by as much as 0.70%. And that 0.20% can add up. Consider a hypothetical $100,000 investment, an 8.6% annualized return over a 30-year period would grow the investment to $1,188,214. With an additional 0.20% (8.8% total return) the original investment would have grown to $1,255,645 a difference of $67,431. Investment Selection A Robo-advisor can’t review economic data, forecast market trends, and adjust your portfolio accordingly, however these investment-only platforms set the value of this responsibility at 0.40%. Further studies have shown households that work with a Financial Advisor for more than 15 years build 3.9 times more wealth than those who do not. Investors who work with advisors also benefit from a greater savings discipline. In fact, they have been shown to save at twice the rate of non-advised investor. So the bottom line is, you’re getting your money’s worth if you are working with a qualified and dedicated Financial Advisor. There is value in advice; of course if you are reading this you already know that. Have a great weekend. Tracey Sources: Original article posted on Advisor.ca 09-14-17 by staff, Econometric Models on the Value of Advice of a Financial Advisor; CIRANO; July 2012,RBC Global Asset Management article; The value of working with a financial advisor, MT05-08-2022 Products or services related to investments, investment recommendations, financial planning, retirement planning, and investment reviews are provided through our mutual fund dealer Security Financial Services and Investment Corp. 4665 Yonge Street, Suite 309, Toronto, ON M2N 0B4 t 416.964.0440 |
