Research published by Russell Investments concludes that the total value of an adviser in New Zealand is approximately 4.7% in 2024.
The firm advises that this is substantially higher than the typical fee charged by advisers and a validation of the holistic service they provide to clients. It is a function of their ability to help clients adapt as markets, regulations, and their own circumstances change.
The analysis is structured around four pillars:
Appropriate Asset Allocation
- Asset allocation is one of the most important decisions an investor can make, having a significant influence on investment returns.
- This is becoming even more apparent as investment opportunities increase, encompassing asset classes that weren’t previously available to retail investors.
- Retail investors are more inclined to remember the returns of individual securities than how asset allocation lays the foundation for overall risk-adjusted returns.
Behavioural Coaching
- Advisers are much more than investment experts – they have an equal role to play in helping clients navigate the emotions that can cloud financial decision-making.
- Advisers play a crucial role in ensuring clients understand that a properly constructed portfolio can weather extreme swings in the value of investments.
- The challenge in 2024 has been curbing investors’ enthusiasm as the AI boom and anticipated interest rate cuts pushed markets to record highs. There is always a risk of investors falling into the trap of buying while markets are bullish and selling when sentiment turns bearish, as history shows it does.
- 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.
Choices and Trade-Offs
- Not everyone understands the extent to which advisers act as financial coaches for clients, guiding them to the best decisions as regulation, social security and their own situations change over time
Expertise
- Advisers’ expertise extends beyond financial matters to human behaviour. This latter skill allows them to forge the trusted client relationships that are necessary to deliver on their recommendations.
- Understanding financial markets and portfolio construction is key to advisers’ training and experience. Advice teams are consistently researching investment solutions by decoding technical terminology to determine what is appropriate for different clients.
- The value of working with an experienced adviser is about tapping into the accumulated expertise they’ve developed over their career. Together with ongoing education, this insight grants them problem-solving skills that can be leveraged by clients at all stages of their lives.