The value of advice can only be measured in terms of what it can actually do for you. You can’t buy advice from a shelf; it’s intangible and individual to you. For that reason it’s difficult to appreciate value or worth before you actually receive it. However, if someone had the recipe for a more financially secure future, you’d pay for it, particularly in times of market volatility.
While many people are tempted to look after their own finances and risk a variety of potential pitfalls and missed opportunities, the right financial adviser has the ability to provide excellent value for money, offering expert guidance, a second opinion, experience sounding board, non-emotional decisions, discipline and effective strategies that reap far better rewards compared to the costs involved.
An adviser can help you to:
- Identify your financial goals and objectives
- Design a portfolio based on your risk profile
- Compare many home loans and financial options to find the right one for you
- Diversify your investment and superannuation portfolio
- Ensure you have the right protection strategy in place
- Develop a savings or education plan
- Construct a budget and ensure you stick with it
Why is good advice worth its weight in gold?
As the graphs below show the value of advice can be measured in three ways:
- The cost of the advice compared to its value (the return on your investments and strategies)
- The amount of money you have for retirement
- The amount of time your money will last you in retirement
Click on the graph to see a larger image
Click on the graph to see a larger image
The information in the above graph is based on a case study undertaken by the IFFP. It assumes that a couple, both aged 55, earn a combined income of $90,000 a year. They need $60,000 a year to live on. Both receive standard employer superannuation contributions of 9% and their funds grow at 8% pa (nominal growth rate). They currently have a combined superannuation balance of $162,000. The grey line shows how they accumulate their retirement fund with this current scenario continuing as their retirement strategy. The red line on the graph shows the value of advice from a financial adviser who recommends a number of superannuation strategies including:
1. They both make non-concessional contributions of $1,000 each year to their superannuation funds.
2. The husband commences a Transition to Retirement pension using $99,000 from his superannuation fund (20% tax-free component). He draws the maximum pension each year, which is 10% of the account balance.
3. This additional income allows the husband to salary sacrifice $33,000 each year into superannuation.
The value of the advice prior to age 55 has been estimated by Bernie Lewis based on the strategies and advice generally recommended for a family acquiring wealth during these years.
