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By Bernard Letendre
Special to the Financial Independence Hub
The investments landscape has witnessed seismic changes in North America and around the globe in recent years. Although the vast majority of customers are either satisfied or extremely satisfied with the services they receive from their advisor — based on The Investment Funds Institute of Canada and Pollara Strategic Insights 2019 Canadian investor survey –one narrative that has been gathering a lot of attention focuses narrowly on fees and goes as far as questioning the value of advice. Like all generalizations, this narrative oversimplifies things and can create misleading perceptions.
If you’re a seasoned investor, you know that picking individual securities to create a desired return isn’t a simple task. Investing to achieve a meaningful goal is even harder: it involves developing a good plan and focusing on outcomes rather than fees and performance alone. And that’s hard work.
That’s why I believe in the value of advice. Studies like the one conducted by CIRANO and the University of Montreal have shown that financial advice results in better outcomes: pure and simple. In fact, findings revealed that investors who worked with an advisor over a 15-year period accumulated 3.9 times more assets than those who invested on their own during the same period. Another interesting finding revealed that the difference in outcomes wasn’t mostly due to investment performance (Alpha) but to other factors such as discipline and increased savings rate associated with the advice received by investors: grouped under the concept of Gamma by the study’s authors.
One explanation for those better outcomes could be that in creating a financial plan, an advisor will ask their clients important questions that DIY investors may not think about: or wish to ask themselves. Secondly, once a plan is put in place, an advisor can play a unique role in holding clients accountable towards their own goals, which may result in better financial outcomes compared to people who rely on self-discipline to keep themselves in check.
When it comes to navigating the big moments in life, like passing down a business to the next generation, recognizing early signs of mental health issues that come with age, or handling the death of a spouse, the complexity of such precarious situations often requires a human touch. Investors need someone with the expertise, emotional intelligence and compassion who goes above and beyond to help them every step of the way. Advisors do that.
Advisors focus on more than just Asset Allocation
As is clear by now, advisors focus on more than just asset allocation to help clients achieve their goals. They’re able to support them with a more holistic approach, which could include advice around tax planning, estate planning, insurance planning and more. This is why investors who benefit from the support of an advisor often achieve better outcomes than if they were to try and do it themselves.
Technology is playing an increasingly important role in investments today. But, at the end of the day, we’re still social creatures and lean on other humans to help us through life’s most important moments. A study from IIROC 2019 supports that belief, with 74% of current investors saying they need financial advice to come from a human. That, in my view, is because advisors bring something to the table that technology alone simply can’t: compassion, understanding and the ability to navigate difficult situations in order to give clients peace of mind. Most consumers, as a result, would not want to handle their own investments and feel their advisors provide them with good savings and investment habits.
On the other hand, there’s no doubt that technology has become essential and can help advisors be more efficient.Technology can help them leverage tools and algorithms so they can do routine things like rebalancing portfolios much, much faster. Leveraging technology frees advisors up so they can spend time doing what matters most – connecting with clients, helping them set goals, discussing potential concerns and what they want for their future and the future of their families.
Because we believe in doing the right thing for our customers, Manulife Investment Management launched a new marketing campaign, Advisors Do That, to support advisors and the value of advice. Based on real advisor experiences, the new campaign puts the spotlight on advisors – the people who are there to help, holding their clients’ hands through good times and bad. They’re the unsung heroes who not only help Canadians achieve their financial goals but go above and beyond to support their clients through all stages of life.
Bernard Letendre is Head of Wealth and Asset Management, Canada, at Manulife Investment Management. He is an active blogger on social and corporate responsibility: follow him on LinkedIn. Bernard brings 25 years of experience in the financial services industry to his role. Before joining Manulife Investment Management, Bernard was Managing Director of Manulife Private Wealth and held leadership positions at BMO Private Banking, Standard Life and Investors Group. He holds a Bachelor and a Master’s degree in law from the University of Montreal, is a member of the Quebec Bar and is a published legal author.
i read your article and wonder if it is just bad luck that has brought me in touch with advisors whose primary concern was their income and making sure the bank was able to charge thousands of dollars in fees for “actively managing” portfolios. I then read the IIROC daily report bringing to may attention all the fines being levied against investment advisors. Does the industry attract people with sticky fingers, seeking blind trust from naive, financially illiterate investors.
With all due respect, this was not my experience with a financial advisor. My once a year phone call was all about selling and buying different investments. There was no discussion of tax implications. When I asked about the location of certain assets in my non-registered account, RRSP or TFSA and whether it was the best, a blank look stared back at me and then I knew that, despite his designation, I had done more reading on the subject of portfolio management than he had. I continued to teach myself the basics and became a DIY investor (there were no RoboAdvisors at that time). Yes there might the few advisors who approach their client’s accounts as described above, but there are a lot of others who don’t. I am now happily retired with a more than adequate portfolio I still manage myself.