“November Always Seemed To Me The Norway of The Year” -Emily Dickinson

The Value of Advice

The Investment Funds Institute of Canada Wednesday released is second report on the value of advice. IFIC says the 2011 report provides additional evidence supporting the value of advice and what a relationship with an advisor can mean for investors.  The research samples studied have shown that investors who work with financial advisors have more wealth and investible assets on average than those who do not.  In the 2011 Canadian Financial Monitor database, the sample of advised investors had an average net worth of $555,447 in 2011 compared to $191,743 for non-advised investors, nearly three times greater. In the same study, investible assets of advised investors were found to be four times greater than investible assets of non-advised investors

The report answers the question of whether investors accumulated wealth before they sought out advice. The research shows that the use of advice is not limited only to wealthy individuals, and that most investors first seek advice in order to start investing and grow their assets.  According to the report, most investors first begin to work with an advisor with only modest amounts to invest; 37% of mutual fund investors had less than $10,000 in total household savings and investments when they first started using a financial advisor, and 57% had less than $25,000.  “The mutual fund industry provides Canadians’ access to capital markets with even small amounts of investable assets,” says Joanne De Laurentiis, IFIC president and CEO.  “With the valuable assistance of an advisor, those small amounts compounded over time can grow into a substantial investment portfolio.”
One of the enduring values of the investor-advisor relationship is that it raises the financial literacy of the client through a continuing sequence of what the federal Task Force on Financial Literacy has termed “teachable moments”. In the words of the Task Force: “Those ‘teachable moments’ include decision points such as joining a pension plan or workplace retirement savings scheme, seeking financial advice or considering the purchase of a financial product, or determining one’s eligibility for benefits from a government  program.  Investing with advice yields higher returns than investing without advice because advisors provide asset mixes that are right for the long-term needs of their clients and encourage their participation in registered plans. When combined, these factors provide net return advantages that exceed the additional cost for advice that is contained within the mutual funds or other financial products used by the investor.

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Sources: Bloomberg, IFIC, Investment Executive