Full-service advisors add more than enough value to client accounts to surpass the typical advisory fee of 1%, according to Russell Investments Canada’s 2022 Value of an Advisor study.
For the past year, advisors added value of 3.85%, the seventh annual study found, with behavioural coaching efforts adding the most, at 1.93%.
As behaviour coaches, advisors can help clients save money by keeping them focused on the long term rather than falling prey to emotions when markets get volatile, the study said. For example, clients who “fled for the exits” in the early stages of the pandemic “could have missed out on some significant gains.”
The value of 3.85% was down from 3.95% in 2021 but up from 2.88% in 2020 and 2.79% in 2019.
“As we emerge into a post-pandemic world full of unknowns, financial advisors should take pride in knowing they’ve helped their clients navigate a tumultuous period and their value is clear,” said Sophie Antal-Gilbert, head of portfolio and business consulting with Russell Investments’ North America Advisor and Intermediary Solutions business, in a release.
The study’s formula was recalibrated this year to reflect the industry’s trend toward holistic family wealth planning. In addition to the 193 basis points for behavioural coaching, the 3.95% figure was made up of 104 basis points for customized client experience, followed by 68 basis points for tax-smart planning and investing and 20 basis points for active portfolio rebalancing.