The Value of Advice - Coaching
Perhaps the most important way of all in which an adviser can add value is through behavioural coaching.
Even those who understand the importance of remaining disciplined find it very hard to hold their nerve in turbulent markets.
At some stage, most investors let their emotions get the better of them and take exactly the wrong course of action.
By persuading you not to bale out of equities during a correction, or to pile in when markets seem to be heading inexorably higher, a financial adviser can easily repay your fees several times over.
One way of estimating the value of behavioural coaching is to compare the returns generated by a fund with the returns experienced by the average investor in the same fund.
This shows how much value investors destroy on average by periodically buying and selling. The figure varies from around 1% per annum to 2%, depending on the market.
If, say, your adviser helps to add an average of 1.5% a year to your returns by managing your behaviour, that will make a very substantial difference by the time you come to retire.