Is a Financial Adviser a Complete Waste of Money?

Is a Financial Adviser a Complete Waste of Money?

Recent findings from the Royal Commission have certainly put the spotlight on the financial services industry.

In all honesty, the Royal Commission reminds me of a tv soap show.  It had all the drama and twists and turns.

Fainting, high profile advisers pulled over the coals and resignations galore to name a few.

However, what it has done is to make everyone question the value of advice.

If you have an adviser you may be extremely happy with them, you may be considering their value or you may be someone who is considering finding an adviser and is just unsure of the value you will receive.

We will hopefully answer those questions for you here.

I will note, however, I am an adviser, so there is a slight bias there.

Before we get to that we have that all-important disclaimer.

This is not advice, I don’t know you, you don’t me or you might know me a little from these posts. 

I don’t know your personal circumstances and you should not take any advice from anyone that doesn’t know you.  That includes your family, friends, and mates at the pub.  They don’t know your circumstances.  

I only give advice to people I know, clients I work with where I know a lot about them by walking alongside them on their journey. 

If you are looking for advice and someone to walk that journey with you, feel free to book a call here to see if we are a fit.  Otherwise, seek the advice of financial professional or accountant before implementing any advice to make sure it’s right for you.  That’s only common sense.

Changing of the Guard!

Have you ever had an experience where you’ve gone to a financial planner only to walk out feeling deflated, feeling like you just wasted an hour of your life?

Not to mention feeling that they only wanted to sell you something?

If so, you’re not alone.  I’ve spoken to many people over the years where this has happened.

The end result, you leave a bad taste in your mouth.  Not to mention your reluctance to speak to another financial adviser again.

Unfortunately, this is largely part of the old sales culture that started the financial planning industry many years ago.

I’m saddened to say this still continues today, however, the changing of the guard is happening albeit at a slower rate.

Sadly many advisers place their value on investment management.  Managing money and tie their fee to exactly that. And therein lies the problem.

After 20yrs in this industry, I find it difficult to understand how an adviser can base their value on portfolio management.

A metric based on achieving investment returns greater than the market on a consistent basis.  A metric which research shows, is near impossible to do.  We’ll discuss this further down in the post.

If you have never been exposed to financial planning, you’re most probably sitting there wondering whether you are going to get value from a financial adviser, are they really worth the cost?

In most instances, we are talking about intangible benefits.

It’s not like you can walk into a car showroom, pick the car you want, buy it and drive out in your brand new car.

You generally walk out with a whole heap of paperwork that makes little sense to you.

What we are going to do is use Vanguard’s research into putting a value on the advice you can receive from a financial planner.

It’s called the “Quantifying Vanguard Advisor’s Alpha”.  You can view the research paper here>>

Want to view the SPIVA study, a study into the Active vs Passive debate on investing.  You can view that here>>

The Ways a Great Adviser Can Add Value

Asset Allocation

One of the most underrated things an adviser can assist with.

However, in the study by Vanguard, they indicated it was a metric that was difficult to quantify given the wide and varied unique circumstances of investors.

What does asset allocation mean?

It’s the allocation of your investments between cash, fixed interest, shares, and property.

In practical terms, it relates to the amount of risk you are willing to take with your investments.  The downside you are willing to wear when markets go down.

Unfortunately, most financial planners still use an outdated risk profile.  This is where you are asked a number of questions and then you placed into one of five investment strategies.

Such as conservative, balanced and growth for instance.

In my experience, the majority come up balanced.

I believe this is an incorrect way of assessing a client’s attitude towards risk.

An effective asset allocation needs to take into account a clients future plans and the success of the plans tied to the varied investment outcomes.


For instance, if you are retiring and it’s been worked out that you are a balanced investor (70% shares and property/30% cash and fixed interest).

Let’s say after completing all the scenarios and projections you have a high probability of meeting all your goals, cashflow, travel, gifts, and any other experiences you are wanting.

However, this type of portfolio could expose you to downside risk, a potential loss of 30% of your portfolio during bad markets. 

For example, if you have $1,000,000 invested it could potentially expose you to a $300,000 loss.

On the other hand, let’s say you had a moderately conservative portfolio (50% shares and property/50% cash and fixed interest).

Let’s say in this example you were still able to meet all of your goals above.  Although you would be accepting lower ongoing returns your downside risk is 15% or $150,000, not the original 30%.

What I have found over many years working with pre-retirees and retirees, it’s not the return that is important, it’s the ability to fund their lifestyle and aspirations when they are no longer working that’s the key, not the actual focus on the best return.

It’s that peace of mind knowing you are not going to run out of money.

Just ask yourself this very question.  “If you were to achieve every goal or aspiration and you never ever beat the market, would you be ok with that?”

It puts everything into perspective for you.

While every client is different, you may want to take the more conservative option, giving you want more peace of mind.

It may seem very simple, but important in managing your experience when it comes to investing your hard earned money.

The value add from this alone is highly valuable.

When was the last time you reviewed your asset allocation?

Cost-effective implementation

Vanguard has indicated this value, implemented right, could potentially add up .40% to your portfolio every year.

Let’s say that you have a portfolio worth $500,000.  The yearly value could be $2,000 pa.

It relates to the cost of your investments.


I had a new client, Sally I took on board last year.  When Sally came in, I reviewed her investment portfolio.

The previous adviser had moved Sally from a low-cost fund to a high-cost fund.  The old school type of adviser focused on investment management.

I couldn’t believe it when I reviewed her investments.

Sally had approx $250,000 in super, 22 managed funds paying an average fee of just over 1%.  Not to mention the upfront cost of purchasing those investments.  A cost Sally did not need to incur.

No way did Sally need that amount of investments, nor need to pay those type of fees to achieve her goals.

Secondly, Sally could achieve a far better outcome by reducing ongoing investment costs.

So, we simplified Sally’s investments and recommended lower-cost investments and now those savings are going build up over time and add to her retirement pool.

In this day and age, there is no need for high-cost investments.  Some would argue they are worth it because they actively manage the money and have a better chance of outperforming the market consistently.

I call B.S. on that one.  Research has shown lower costs lead to better returns for investors.

You can read the latest research from SPIVA here>>


This one is huge and in my experience one that many neglect and then regret it when investment markets turn on them.

Vanguard indicates this could be worth up to .35% pa to you.  For example on an investment portfolio worth $1,000,000, that would be up to $3,500 benefit pa.

Once an asset allocation is selected, it’s important to one, review it every year, and second, rebalance at least on an annual basis.

But, hey Glenn, why can’t I just let my investment portfolio run, it’s doing well.  I don’t want to sell when everything is doing well.

I can’ tell you the number of discussions I have had around this one.

It seems counter-intuitive to sell when things are doing well, right?

Here’s the thing, following a disciplined process where there is no emotional involvement is highly valuable.

Just remember the discussion we had above about asset allocation.


John became a client just prior to the Global Financial Crisis.  When I reviewed John’s portfolio he had all his investments invested in property trusts. 

They were doing well and John started chasing the best performing investment.

At this time the property trusts had started suffering a little.  Down approx 10% and starting the fall quickly.

John was retired and living off his investments.  I couldn’t believe someone had been invested so heavily in one asset.

Nevertheless, we started applying our disciplined approach by reducing John’s risk and setting up the investment portfolio the way it should have been in the first place.  Lucky John saw us when he did, post this change they crashed.

John’s retirement would have been jeopardised and in tatters had he remained in such a high-risk portfolio.

The true benefit is following a disciplined approach of rebalancing back to the asset allocation you are comfortable with.

If you are approaching retirement or about to enter retirement it’s not about maximising your return anymore, but managing the risk in retirement.

A good adviser will help you implement this.  They will also assist in managing the trade-offs, cost of transactions and tax relating to rebalancing.

Behavioural Coaching

This one is a big one.  Based on the behaviour of investors.

Vanguard indicates in their research it could add up to 1.5% to your return.  Potentially the largest value add a great adviser can make.

If you have an investment portfolio of $750,000, an adviser could potentially add up to 1.5% pa.  That’s up to $11,250 by helping you maintain a disciplined approach.

A great example of this one is during the Global Financial Crisis.

If you can remember back that far, it was scary.  It was like the bottom was falling out of the market.  Every day you were suffering losses and at times seemed like you would have nothing left in your portfolio if it kept going.

We had many discussions with clients, almost daily about staying the course.  We had set our clients up so they could withstand such market movements.

Subsequently, our clients sailed through and reaped the rewards of holding the course and not reacting to such market movements.

While there were others, not with me, stories I had heard where people had withdrawn all their money from the market and placed it all in cash.  All said they were going to invest at the bottom.

Here’s the thing, no one knows when that is going to be.  Now, those people are sitting there kicking themselves for not holding the course and not getting back in the market.

Hundreds of thousands lost.

Things like trying to chase market performance can have a significant impact when things turn.  After all, we are only human and we like to chase things that are doing well and avoid the things that are not doing so well.

A great adviser with a disciplined approach can be priceless to you, sometimes you cannot put a dollar value on that.

We are presently having this discussion with all clients this year.

Bringing them back to the disciplined approach we implement for them.

We have some clients who are trying to chase market returns, which if timed wrong could end up jeopardising their retirement plans.

We will be bringing them back in line with the disciplined approach we use for all clients.

Asset Location

While Vanguard discusses this in terms of US accounts, it equally relates to Australian investors.

Advising where to place assets can add up .75% pa to your return.  That’s $7,500 based on a portfolio size of $1,000,000.

What is Asset Location?

It’s the placement of your investments between different investment vehicles.  Such as super, account-based pensions, personal name or tax bonds to name a few.

Given the recent limit decreases on super contributions and total balances this could add substantial value every year.

A great adviser will help you assess your options based on your timeframes and work through where investments should be placed to optimise your tax outcome.

Whether that be contributions to super, paying down your mortgage or using a tax bond for investments outside super to name a few.

It could also be where you hold certain assets to maximise the after-tax benefit of a sale down the track.

Withdrawal order for client spending from portfolios

Where you take your funds from when drawing down from your portfolio’s could potentially add 1.1%pa.

However, if you have all your funds in tax-free structures such as an account based pension, there may not be a benefit here.

The superannuation system is a complex beast and I don’t see it getting any simpler any time soon.

Managing your way through this alone could be well worth the fee.

Whether you set up two accounts, where you draw your income from the account that has most of the taxable components and less from non-taxable super funds.

Or, if you have exceeded your $1.6m cap, how do you invest across tax-free and taxable environments.

All will be a value add.


Add it all up and potentially an adviser can add between 1-3% in value a year.

You’ll find that that is going to ebb and flow over time.  It’s something that is going to happen in chunks and generally at critical points in your lifetime.

While you could be thinking that I just need to hire them at certain points.

It’s that shared history that you have over a period of time, where they understand your history to better help you make important decisions when they need to be made.

Employing an adviser at those certain points, not knowing the history will not help you as well.

While this study focuses on the investment side of things and following a disciplined strategy will get you the benefits I believe there are other areas that clients get the benefit from.

What we base our value proposition on is helping clients make all those important decisions along the way to retirement or in retirement.

For instance, helping them determine their spending plan.  Helping them determine whether they can enjoy more now while still being able to achieve their retirement lifestyle.

Figuring out what they can do to maximise their active years in retirement and not jeoparding their long term lifestyle.

Helping them figure out how much risk they need to take achieve their retirement lifestyle, rather than sitting there worrying about it in retirement

Helping them with cash flow decisions.  Do I take a dream trip away and what impact will that have.

It could be you want to help the kids out, what impact is that going to have on your lifestyle and income levels.

If I retire later what is that going to look like.

One we did recently, a client wanted to buy a larger yacht to go sailing on.  We ran all the numbers and the outcome the client was expecting was not going to work.  The decision, to retain what they have.

Do I sell my house and relocate?  What impact is that going to have on my lifestyle in retirement?  Decisions we are helping clients with now.

With that shared history, helping clients make informed decisions to protect their position.  Is a certain decision going to handicap me financially in the future?

I think back to one of my clients (Harry and Julie) we took on board a couple of years ago.  Prior to us, Harry & Julie had purchased two townhouses in Melbourne, without the advice of anyone.

Subsequently, when I was introduced to Harry & Julie they were looking to retire.  These two townhouses had a decrease in value by approx $250,000 by the time they sold them.

Had Harry & Julie sought advice prior to buying these investment properties, a great adviser would have been able to assess their needs and work out that Harry & Julie did not need to buy the townhouses to achieve their retirement dream.

As part of Harry & Julie’s retirement, they wanted to add a second story to their home.  A place to add a study and an open area where they could spend quality time with their grandchildren.

Because of this loss, they only have enough to fund their retirement lifestyle and not the addition of a second story.

Although the Vanguard research shows the value of advice based largely on the investment side of things, a great adviser can so much more value in other areas as well, as we have talked about above.

While I think a large part of the industry is still focused solely on investment management, an area the research shows little value if any can be added.

There are few advisers who intentionally think about the areas I have discussed above.

I believe if you are looking for an adviser, the value you are looking for should not be in portfolio management.

It should be in the holistic planning where the focus in on helping you to live well now while allowing you to comfortably ROCK RETIREMENT…

It’s about having the right conversations on your unique circumstances and the life you want to live.

If you start working with a fee-based adviser, like us, it’s about continually evaluating the value you are receiving.  If you no longer see the value you can disengage from the relationship.

Hope that’s been useful!!

Now, go ROCK this…


If you’re someone who is up to 15 years away from retirement.   You plan on being self-funded. You have accumulated some assets and want some help in figuring this stuff out.  Feel free to book in a Safeguard Your Retirement call here>>> and we can help you work out what that first step is for you.

I’ll be honest here, we won’t do your pushups for you.   But if you are motivated for the right reasons we can save you a lot of time and heartache.  We can save you from the mistakes most people make to fast track your way to a ROCKING RETIREMENT.

Ps. We don’t sell you anything on this call.  We will help you determine what the next step is for you.  However, if you are someone who is looking for a get rich scheme, silver bullet or believe you know everything we are not for you. If you are someone who really wants to achieve financial freedom, committed and wants to work collaboratively then we can help.

Hope that’s been useful.


Know someone that would gain benefit from the information, feel free to forward on.


Make it a great Life!

Challenging the Status Quo!

Glenn Doherty – CFP – Founder & Financial Organiser at Jigsaw Private Wealth



Mob: 0401 253 729

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Advice Disclaimer: Any reference in this publication to the provision of advice refers to advice of a generic nature, and should not be taken as product or investment recommendations. Before any action is taken based on the information provided, independent financial advice from a licensed financial adviser should be sought. Financial Freedom Project Pty Ltd ATF GA & DC Doherty Family Trust Trading as Jigsaw Private Wealth is a Corporate Authorised Representative of Exelsuper Advice Pty Ltd. The information contained in this publication is of a factual nature only and is not intended to constitute financial product advice. Information is current as at date of publication. This is an online information blog. It does not imply an offering of securities.

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