Zurich IQ blog article
Colum O’Brien, Head of Retail

DIY Investing Vs Financial Advice

In an era of online investing, fee compression and budgeting apps – you could question the role of a traditional financial adviser as a relic of a bygone era. Years ago brokers and advisers were the guardians of financial data, the keepers of the stock quote. But today, investors need only an iPhone and a free online brokerage account….or do they? Read on as Colum O’Brien, Head of Retail at Zurich Middle East discusses the value of advice.

All I need is an app and an online trading account, right?

Just as anyone can look up a sensible workout regimen, it is not difficult to find online tutorials and guides that teach you how to invest. But if knowledge were sufficient to induce appropriate behaviour, the majority of us would be in perfect health and personal training would be an obsolete profession. However, we all know that while appropriate knowledge is an important and necessary starting point, a coach that ensures you have a plan and stay on track is demonstrably more important.

The team at Vanguard estimate that the value generated by working with a financial adviser is worth roughly 3% a year. These benefits are said to be most profound during times of extreme market movements, like December 2018 –when we become susceptible to bouts of fear and greed, abandoning a well laid out investment strategy. These findings suggest that an adviser is equally important as a behavioural coach and an asset manager.

Although 3% may seem a small annual return for using a financial adviser, anyone familiar with the marvel of compounding understands the enormous power of such performance. This is also highlighted when you look at the wealth of families who receive advice against those who don’t.

The dollars and cents value of advice

The headline number for the advice industry, based on a study in Canada, is a 290% wealth difference in favour of advice-givers. The study showed that the households who had chosen and retained a financial adviser, accumulated 290% more assets on average, over 15 years, than those households who did not have an adviser.

The study also showed that the adviser impact was more pronounced over shorter periods. Over four years, Canadian households who had an adviser, accumulated an additional 69% in assets on average, than non-advice households.

Moreover, this study highlighted that households that let their financial adviser go, experienced declines in their investment assets and those who kept their advisers saw the value of their assets increase.

While there is no comparable study in the UAE and no-doubt it would be interesting to conduct one, the results are clear – across the range of scenarios. Good financial advice pays in the short run, but the multiplication of those gains over an investing lifetime is truly staggering. As we look beyond dollars and cents, it is worth considering whether there are quality of life benefits to be enjoyed by working with a financial professional.

And relax, greater confidence…more certainty

The Canadian ‘Value of Advice Report’ found that those who had an adviser were more confident about their ability to retire comfortably and have higher levels of funds for an emergency. Receiving good financial advice pays a dividend that builds both wealth and confidence. The research is unequivocal - a competent financial guide can help you achieve the returns necessary to arrive at your financial destination while simultaneously improving the quality of your journey.

So, do financial advisers add value?

The research strongly supports that they do, both in terms of improving means and quality of life. In simple terms, a good adviser is someone who we will listen when we are worried about our savings and most of all will save us from ourselves. Financial advice is a straight-forward solution to the complex problem of managing investor behaviour.

Tips to help you find the right financial professional

Get ready to ask the right questions and build a better rapport with your adviser by using our guide to the 10 building blocks for a successful advice relationship.

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