Advisers add 5.7% premium

Financial advisers add 5.7% in value for client portfolios, a new study shows, down from 5.9% last year.

Now in its seventh year, the Value of an Adviser Report by Russell Investments found financial advisers continue to deliver for clients, particularly during this year, which required balancing competing emotions triggered by a bull market and a cost-of-living crisis.

The overall value advisers add of 5.7% is broken down into guidance provided on asset allocation (1.1%), behavioural coaching (3.3%), and tax planning (1.3%).

​More than half of the 5.7% benefit was derived from advisers' ability to help clients avoid kneejerk decisions amid market volatility and economic uncertainty, Russell Investments head of distribution in Australia and New Zealand Neil Rogan said.

This included encouraging clients to remain disciplined and reweight portfolios as global share markets reached record highs despite the temptation to chase more gains.

One challenge in 2024 was curbing investors' enthusiasm as the AI boom and anticipated interest rate cuts pushed markets upwards. Investors typically face the risk of falling into the trap of buying while markets are bullish and selling when sentiment turns bearish.

"This is where the adviser's expertise in reweighting portfolios at regular intervals to maintain long-term financial plans is vital. Investors are more likely to grasp the benefits of that process when presented with the historical advantages of maintaining a steady investment strategy instead of chasing quick wins, then bailing when markets turn sour," Rogan said.

Rogan added that advisers are more than financial experts - they are also behavioural coaches who help clients.

"Advisers' practical support also helped clients maintain strategies like dollar cost averaging as rising inflation cut their disposable income," he said.

Advisers' value add has decreased by 0.20% from 2023. In 2022, the value of an adviser was calculated at 5.8%.

​