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The Value of Advice

Research has uncovered the measurable value that advisors provide.
Over the past four to five years, there has been ample research focused on answering the question, “Do advisors provide value?” Time and time again the research says, “Yes.” Investors who work with advisors tend to accumulate more assets and be better investors.
The quantitative value of advice
People who work with advisors have more assets -- significantly more over time -- than those who don’t work with advisors. Compared to unadvised households, households that receive professional financial advice accumulate: 

  • 1.58 times more assets over 4-6 years*
  • 1.99 times more assets over 7-14 years*
  • 2.73 times more assets over 15+ years* 
This is a meaningful difference -- the difference between $250,000 and almost $700,000, between $1 million and over $2.7 million. If an investor’s primary investing goal is to build assets toward a comfortable retirement, advisors are an important partner on their journey.
The qualitative value of advice
Not all of the benefits of professional advice are immediately measurable. They are, however, tangible over time and equally important as investors work to achieve their long-term financial goals. Below are vital ways that advisors add value by making people better investors:

  • Maintaining a long-term investment strategy. From marriages and the birth of children, to divorce and illness, life changes over time, and advisors know how to make adjustments to financial plans while sticking to a long-term investment strategy

  • Protecting against poor financial decisions. With all the bad financial advice floating around out there – especially in the media – advisors play a key role in helping investors make intelligent, informed decisions

  • Avoiding emotional investing habits. When markets are volatile, investors often react with a “fight or flight” response, and they can make damaging long-term decisions, such as selling low and buying high. Having a professional investor by their side is proven to mitigate investors’ emotional response 
Advisors can also help investors select tax-efficient investment vehicles. This includes recommending the best way to use RRSPs and TFSAs, investing in bonds and stocks in an effective manner, and creating a portfolio that can generate a sustainable income stream.
Advisors add value by helping investors accumulate more assets, and by sticking to their plan, staying disciplined and avoiding emotional decisions during volatile times.

“The value of advice report 2012,” Research conducted by the Center for Interuniversity Research and Analysis on Organizations (CIRANO) on behalf of the Investment Funds Institute of Canada (IFIC)

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