With you every step of the way

The value of financial advice
Investors who work with financial advisors are more likely to resist the temptation to redeem at the wrong time and, instead, invest for the long-term. As a result, they achieved better performance than "do-it-yourself" investors. This was the silver lining in a landmark 2001 study by Boston-based Financial Research Corporation (FRC).

It proved what many financial professionals already suspected: that investors routinely make decisions that have a negative effect on the performance of their portfolios. After carefully sifting through mutual fund sales and redemptions over a ten-year period, FRC came to the conclusion that trading too frequently and at the wrong time cost investors 20% in returns during that decade. The biggest factor contributing to this shortfall was that investors tended to "buy high" and "sell low," when they should have been buying and holding.

Boston-based Dalbar, Inc. reached similar conclusions in its 2003 study of investor behaviour. Dalbar looked at 19 years of equity returns and found that the average equity investor earned just 2.57% each year during the study period – less than inflation (3.14%) and much less than the Standard & Poor's 500 Index (12.22%). Like FRC, Dalbar's assessment was that "motivated by fear and greed, investors pour money into equity funds on market upswings and are quick to sell on downturns."

The FRC study showed that the value of financial advice is both measurable and significant. By encouraging investors to stay the course, professional advisors helped their clients capture returns that approached or exceeded the three-year average mutual fund return during the study period – 10.92% – rather than the 8.7% earned by the average invested dollar over the same timeframe. Over time, through compounding, that return gap could be expected to grow, leaving investors who followed the recommendations of financial advisors markedly ahead.

Who's using an advisor?
Four in ten Canadians benefit from the performance edge a financial advisor can bring to their portfolios, according to a 2002 Forrester Research survey. Another 8% said they intended to hire an advisor within the next 12 months. When asked about their returns, investors with advisors were more likely to say that their holdings had delivered good results over the past year. Financial advisors' clients also had more confidence that their portfolios were well diversified.

That feeling of trust also came out in another Canadian study released by Ipsos-Reid in 2001. It found that nearly two-thirds of investors who had consulted with a financial advisor in the past year reported that they were satisfied with the service their advisor provided. Sixty percent said that their advisors were "an important source of information." That's more than double the number who said the same of the media, the Internet or their families.

Together, these results suggest that financial advisors can not only boost your performance, but also give you peace-of mind by designing a professional asset allocation tailored to your needs and providing reliable information about your investments.

More than investments
An advisor who is with you every step of the way can help you assess your entire financial situation and design a comprehensive plan that works for you. This plan may include recommendations that allow you to save taxes, meet your short-term cash flow and long-term saving goals, prepare for unexpected events, such as critical illness or disability, and design an effective and efficient estate plan.

Your advisor can adjust your plan as your circumstances change – for example, if you retire, sell your house or have to cope with the loss of a spouse. As your children grow up and require financial advice themselves, an advisor can develop an integrated family plan that minimizes your overall tax bill and ensures the smooth succession of your assets.

Along the way, your advisor can refer you to complementary professionals, such as accountants and lawyers, when you need specialized advice. And, of course, he or she can recommend appropriate choices from the vast universe of investment and insurance products available in Canada – and keep an eye on them over the years so you can spend more time enjoying your life and less time worrying about money.

Talk to your financial advisor about how he or she can help you reach your goals now and in the future.

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With you every step of the way