The average Australian receiving advice could be A$559,000 richer over a lifetime as a result of their adviser's work, according to the new Value of an Adviser report by Russell Investments.
The study found that quality financial advice in 2019 contributed, at a minimum, 4.4% per annum of value to clients' portfolios.
"This report reinforces the value of advisers, which goes beyond investment-only advice and is derived from both the technical and emotional guidance they provide. For this reason, we believe advisers have never been more valuable in Australia," Russell Investments Australia managing director Jodie Hampshire said.
The overwhelming majority of clients in Australia do benefit from quality advice”
"The overwhelming majority of clients in Australia do benefit from quality advice," she added.
It estimates an adviser's ability to mitigate behavioural mistakes alone adds 1.9% in additional returns to a client's portfolio. Those behavioural mistakes include loss aversion, over-confidence, herding, familiarity and mental accounting.
Russell also found there is a cost to getting it wrong for those who are unadvised, and this comes at an additional 1.6% in returns that those without professional advice are missing out on.
Tax-smart investing can add between 0.9% to 1.2% to portfolios through the sum of tax effective investment strategies and salary sacrifice superannuation contributions.
"We think adviser value far exceeds the amount they are charging their clients and, more importantly, the report is providing them with a framework to have a really sensible conversation around fees versus value with their clients confidently," Hampshire added.
The study also considered the full equation of an adviser's services, overriding the common misconception that advisers are simply investment managers selecting investments for clients with the aim of achieving a certain level of return.