I recently read a study called ‘The Value of Advice’, published late last year by The CPA.
It’s a broad study, with the aim of informing potential regulatory reform. In particular, it stresses the need for a more holistic, client-focused approach to advice. This is something I’ve been telling my clients for decades, and in a moment I’ll explain why.
But first, I wanted to talk to you about one set of data that really stands out. This is because it shows just how much difference investing in advice can make to your finances.
You could be pocketing nearly $25,000 extra every year.
The CPA found that seeking professional advice increased an individual’s annual income by 30.6% – on an average income, that’s an extra $24,716 a year.
For perspective, they estimate that if every properly implemented advice was available for every Australian, the total economic uplift could be up to $660.1 billion a year. That’s huge.
What it also means is that in 4 years, the person who invests in professional advice is likely to earn nearly $100,000 more than the person who decides to go it alone. We often refer to this steadily widening income gap as ‘The cost of doing nothing.’
Yet despite this, the study also found that there are plenty of Australians who are still reluctant to invest in quality advice because of the initial upfront costs.
So if you often find yourself thinking along these lines, then it’s worth considering that you may be missing out on tens of thousands of dollars down the track – just so you can save a few dollars today.
How did the CPA get these results?
They reached these figures by using macro-economic modelling. Essentially, they measured income risk now against a scenario where professional financial advice is properly implemented, with the difference expressed via a dollar value.
As you can see, those who seek advice fare significantly better than those who didn’t. I won’t bore you by breaking down all the math, but if you’re interested in diving deeper into the findings, you can find the full report online.
Alongside the hard data, they also surveyed 1,244 consumers and 815 SMEs about the intangible benefits of receiving professional advice.
Respondents reported benefits to physical and mental health, family and social life, their relationships and their work satisfaction. Conversely, those who do not invest in advice are more likely to experience negative impacts in these areas.
As I mentioned before, the study also strongly advocated for regulatory reforms that focus on making it easier for consumers to receive broader, more holistic advice. This is something I’m very passionate about, so let me explain why it makes such a big difference.
You’ve got to consider the whole wealth pie – not just a slice.
As the above data shows, it’s clear that professional advice has a huge financial benefit for Australians. But the study also found that professional advice is most effective when it’s client-centric, meaning that it takes in all the interconnected aspects of a client’s business & finances.
This is especially true for those who run small businesses (SMEs). The Scotpac SME Growth index tells a similar story to The CPA study. It shows most businesses are reluctant to seek out advice beyond basic tax and accounting requirements, despite the clear benefits.
Once again, the frustrating way the advice sector is regulated & segmented is cited as a major issue. Accountants Daily have published a great breakdown of the data if you’re interested.
Having spent decades championing a holistic advice model to our clients, this all comes as absolutely no surprise to us. We firmly believe that to help a family improve their business, you need to focus on the whole family wealth pie – areas like tax and accounting only make up a couple of slices.
But as the Scotpac data shows, a lot of advisors will focus rigidly on this one area out of fear of overstepping regulations. They leave their clients to go seek out that other wealth advice themselves – but they often won’t know where or how to find it. This narrow approach ultimately keeps clients in the dark, preventing them from capitalising on the true value of advice.
This is why we’ve worked hard to make our advisory service different. We’ve built a client-centric model, with a deep network of trusted professionals we can refer our clients to when something is outside of our field. This makes the process easier for everyone, and it allows us to provide our clients with consistent, interconnected advice that they can really take advantage of.
Investing in advice gives you an edge.
You might notice I keep saying ‘investing’ in advice – and that’s no accident. Upfront costs are often flagged as the reason that many decline to consult a professional advisor.
But thinking of it as a cost is the wrong way to go about it.
Advice is an investment in yourself or your business, and one that usually pays dividends. With over 20 years of experience in the industry, I can confidently tell you that any financial advisor who’s worth their salt should be able to generate enough value for your business to far outweigh the initial cost.
Don’t be someone who misses out.
Unfortunately, as the CPA study shows, many people don’t realise this until it’s too late. However, this does provide another way of looking at the situation.
If most Australians are not engaging properly with advice, then that means you’re developing a serious edge by being one of the few to proactively seek out advice. This is especially true if you’re investing in more complex advice that engages with the whole family wealth pie.
By recognising the true value of advice and taking the initiative to invest in yourself or your business, you’re in a much better position to grow your wealth than the many who are bearing the cost of going it alone.
You’re making the smart decision by seeking help – and your future will thank you for it.
Has it been a while since you’ve engaged with advice? Or perhaps you’re looking to take the next big step in your business. Whatever you’re planning to do, our business advisors can help you make sure you’re going about it the right way. Don’t hesitate to get in touch today for a confidential chat.
Disclaimer: This advice is general in nature and does not take into account your personal objectives, financial situation or needs. You should consider whether this advice is suitable for you and your personal circumstances before acting on it.
