Over the past couple of months, we’ve written about the three benefits of fixed fees and also explained how financial planners charge while comparing our fees. However, price is only one side of the coin – it’s even more important to consider value.
As Warren Buffett once said: “Price is what you pay. Value is what you get.”
With that in mind, this month we’re looking at the value our clients get from financial planning.
In our experience, the benefits fall into two main categories; those which make you financially better off and those which improve your wellbeing.
Let’s deal with each in turn.
Financial planning builds wealth
There have been various studies that clearly demonstrate that financial planning helps people build and retain more wealth.
Perhaps the most comprehensive is Vanguard’s Adviser’s Alpha, which shows that if a financial planner1 follows best practice, they can improve a client’s wealth by up to 3% per year.
The figure of 3% is broken down as follows:
- Cost-effective implementation: 0.29% to 0.44% per year
- Rebalancing: 0% to 0.48% per year
- Behavioural coaching: 1.5% per year
- Tax allowances and asset location: 0% to 0.32% per year
- Withdrawal order for client spending: 0% to 1.53% per year
The study also highlighted that there are other areas where significant value is often added, but they are too variable from one investor to another to quantify.
We do all these things, and more, for every one of our clients. Therefore, we feel confident that the value we add, in financial terms alone, far exceeds the fees we charge. Furthermore, as our fees are fixed, the financial benefits for our typical clients, who have invested assets in excess of £1 million, are even more compelling.
However, as Vanguard says: “This increase should not be viewed as an annual value-add, but is likely to be intermittent. Some of the best opportunities to add value occur during periods of market stress or euphoria when clients are tempted to abandon their well-thought-out investment plans.”
Never has that been more apparent than in February and March last year when stock markets were falling, and we were all worried about Covid-19. During that period, we communicated with all our clients regularly to provide reassurance and coached those who were worried and considering withdrawing from the market (which would have been the wrong thing to do).
We’re delighted with the feedback from clients that this did put their mind at ease during this incredibly difficult time. After all, it’s what we’re here for!
Financial planning improves your wellbeing
Understandably, when people first start working with a financial adviser or planner, they are likely to consider the benefits from a largely financial perspective. Perhaps how we can help them improve returns or invest in the right places.
There’s no doubt working with a professional can help in these areas, but financial planning goes much further. Choose the right financial planner and they can help you live the life you want, feel more confident about the future, and give you much needed peace of mind.
By way of some real-life examples, we’ve recently worked with clients to show them they can: retire from careers they’re not enjoying; afford to gift money to their family now rather than wait for them to have the benefit; upscale their property, even as they make the transition into retirement; and change career, taking a substantial reduction in income in the process. All this with the confidence they can maintain the holidays and lifestyle they dreamed of having in the future. Financial planning can help you make bold life decisions you didn’t believe were possible.
The results of our 2020 client survey emphasise this.
For example, when we asked: “What would you name as the biggest single benefit of working with us?”. Investment performance, risk management and fund selection, all things which people might feel that they want from their planner, didn’t feature. Instead, the three most commonly used words were:
- Trust
- Reassurance
- Peace of mind
That was music to our ears as it’s where we believe the true value of financial planning can be found.
Furthermore, when we asked: “How do you measure the value you receive from us?” the most popular answer, with 90% of people saying it was very important, was: “Knowing I have a ‘go-to’ person and team.”
In second place was: “Progress towards achieving financial and life goals.”
In the words of a Life Matters’ client
Research and surveys only go so far. So, we’ll give the final word to Robyn McLelland, a Life Matters client who was featured in VouchedFor’s 2020 Guide to the UK’s Top Rated Financial Advisers as distributed in The Times.
When Robyn was asked about the value of financial planning, she said: “It’s been such a comfort over the years to have Emily to call on. She’s steered me through divorce, redundancy, setting up my own company and helping me to leave a legacy for my girls. Financial planning is worth every penny.”
Sharing peace of mind
If you believe that your friends or family can benefit from the peace of mind that award-winning financial planning can bring, we’d be delighted to chat with them.
Please forward them this article or ask them to contact us at your@lifemattersfp.flywheelstaging.com or call 01202 025481.
1 Vanguard use the word “Adviser” in their study in the same context we use “Financial Planner”.