We talk about compounding investment returns so why not talk about compounding the value of advice?

Are we having the right conversations?

There is much value in individuals seeking professional financial advice throughout their lifetime. Often there are significant life events that require specific financial advice but it is ensuring that the client stays on track during those events – the ongoing monitoring and adjusting –  that can often determine the long term success of an individual’s future.

A number of studies undertaken by large investment companies such as Vanguard, Morningstar and Russell Investments have aimed to identify any additional ‘alpha’ for members of the public seeking professional financial advice.  These studies had landed on different figures but they all indicated an approximation of around 3% of additional returns above the market return each year. Even if this figure was only 2% what would the difference in return for clients be if the market return averaged 5% per annum.

The table below shows the impact of this potential increased return of an initial £300,000 investment over various time periods.

 

The impact is significant and to paraphrase Albert Einstein, may be compounding advice could be the next wonder of the world (OK – not quite but it’s good to aim high).

EDVOA is suite of online tools to help complement the conversations you are having withyour clients, demonstrating the value of advice.

 

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