Do you need a Financial Advisor? Yes. You do. We all do. Why? Because an expert advisor will save you from making poor financial decisions and guide you towards a consistent and disciplined investment strategy. But don’t just listen to me, here’s the evidence from around the world.
1. To begin at home in Ireland, in a brand new 2023 survey by the Financial Planning Standards Board, people who work with a Certified Financial Planner say they are better off, have a better quality of life, report improved wellbeing, enjoy more financial confidence and resilience, and feel more satisfied with their financial situation.
2. A 2017 UK study by the International Longevity Centre found that affluent people who took advice had £24,266 more after 10 years than their non-advised counterparts, an 11% differential.
3. A comprehensive survey of Canadian households by CIRANO in 2012 compared households with the same starting wealth and showed that those who use a financial advisor have 1.6 times more financial assets after 4-6 years of advice, 2 times more financial assets after 7-14 years of advice and 2.7 times more financial assets after 15+ years of advice. The research concluded that this significant wealth difference over time was attributed to the advisor encouraging more saving, better asset class diversification, tax efficiency and impartial fund advice.
4. The renowned Vanguard Advisor Alpha study, last updated in 2020, indicated that an advisor has the potential to add a net annual return of about 3% for clients, through varied advisory services and an ongoing relationship.
5. Finally, the renowned annual DALBAR study (see 2022 here) concluded that investors underperformed the S+P 500 by nearly 3% per annum over the last 20 years due to bad investing habits and poor buy/sell decisions (buying high and selling low). This difference between market returns and investor returns is often called the Behaviour Gap.
I have written often about how investor behaviour can damage returns – and the evidence above bears this out. It’s one of the main reasons why an unbiased expert voice in your ear can make you a much more successful investor.
And if you like this article, try this one: Planning for Life