How much is financial advice worth?

How much is financial advice worth?

How much is financial advice worth? 150 150 Todd Clifford

At Viridian, a question we get asked regularly by clients is “what’s the value of your advice?” I believe this is best explained by something we call the advice gap.

We strongly believe that a person who has received consistent advice over time will achieve a better outcome in their financial affairs and welfare than someone who is self-directed. The advice gap represents this difference in outcomes over time.

But the gap isn’t just financial. When you have an advisor who truly understands you and is helping you make tough decisions, you gain more than money. You’re more confident to make decisions, you’re more prepared to head into retirement and you’ve got the underlying confidence that you’re on the right path.

Great advice is built on great understanding

Regardless of financial advice, the reality is that most people in Australia today will survive thanks to compulsory superannuation and retirement benefits. But will you achieve your own personal goals? Will you achieve the things that you hope and plan for?

The biggest benefit of financial advice is increasing your base case from “okay” to something that reflects the goals and life you choose. That’s why the most important part of any advice relationship is to understand your ‘why’. What are you trying to achieve and what are your goals?

This is a really hard conversation to have on your own. This is because people are emotionally connected to money so it’s difficult to make objective decisions or to challenge your own thinking. But if you have an advisor that understands you and wants to help you achieve your goals, they can help make sure your decisions are connected to your long-term vision.

Bridging the gap is a long game

The advice gap isn’t created in one meeting. It’s the outcome of a relationship that continues for 10, 15 or even 20 years. That gap widens each time we review goals and adapt the plan.

You can’t just create a plan, set and forget it. We live in a dynamic world and things change all the time. Work, relationships, salary, the economy – it all changes. Each change is a pivotal point where you have the opportunity to make a decision that may affect you 20 years down the track.

Put simply, we believe that advised clients end up far better off than people who are self-directed and our long-term clients feel the same way. I often see clients in the 50s they tell me how they wish they’d started getting advice in their 30s. Then by the time they’re in their 60s they wish they’d started in their 20s. That’s because over the course of decades years, you can really see the compounding impact of the hard conversations that were had years ago. That realisation is the advice gap, and the real value of long-term financial advice.

Todd Clifford is General Manager Viridian Select

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