We add value through informing, advising and coaching our clients:

  • Behavioural Coaching – we help you to understand the key errors of judgement that investors make and coach you to avoid costly mistakes.
  • Tax Efficient Accumulation – we share with you how we utilise tax efficient opportunities to maximise your returns through tax relief and tax allowances during the accumulation phase.
  • Tax Mitigation – we deploy a number of strategies to mitigate tax on your underlying investment interest, dividends and gains, the income and capital you withdraw and on your estate.
  • Diversification & Asset Allocation – we enhance returns whilst mitigating risk by ensuring properly researched strategic and tactical asset allocation sits above your underlying investments (e.g. Unit Trusts, OEICs, UCITS, Collectives). A client portfolio typically holds a mix of asset classes; global stock markets, government & corporate bonds, property, infrastructure, gold & precious metals, other commodities, a range of alternatives and different currencies.
  • Rebalancing – we ensure your portfolio is periodically rebalanced back to the required asset allocation to enhance returns.
  • Underlying Investment Selection – we add to returns by ensuring the underlying investment instruments that meet the desired asset allocation undergo regular quantitative and qualitative screening to ensure they remain appropriate and are performing as expected.
  • Investment Instrument Switching - we ensure that underperforming investment instruments are substituted out of the portfolio.
  • Investment Manager Switching – Where we out source your investment management to a third party such as a Discretionary Portfolio Manager (DPM) we monitor their performance relative to other managers and switch your investments away from them if they manage your money irresponsibly, underperform or become uncompetitive.
  • No Conflict of Interest - as we do not manage client money ‘in house’ nor do we have any affiliation or ownership of any company that does, we have no conflict of interest in trying to ‘shoehorn’ you into investments that benefit us. We have no allegiance to any investment company or solution; if they stop performing, we replace them.
  • Withdrawal Strategies – we share how we utilise various tax efficient opportunities and allowances to mitigate tax through the decumulation phase.
  • Investment Wrapper Selection from the whole of the market – with our finger on the pulse we are able to select the best value products in the market place and negotiate discounts due to our size, which we pass on to you.

Quantifying ‘Adviser Added Value’ (AAV)

EDVOA is a company that specialises in quantifying the added value that advisers deliver to their clients.

The assumptions that power the EDVOA suite of tools are based on extensive research and analysis carried out by a number of organisations. This analysis has sought to place a value on the difference advice has made to investment returns.  When we add the effect of other strategies as detailed above the overall wealth of our clients can be enhanced by several percentage points for each year that we deal with them.  Without doubt, our strategies have made many clients hundreds of thousands of pounds better off through our relationship with them.

EDVOA used the following sources to inform their own calculations:

Vanguard Adviser Alpha
Evestnet Capital Sigma: The Return on Advice
Morningstar Alpha, Beta and Now Gamma
Russell Investments Value of Professional Advice
Russell Investments: Powering Advisor Success
The Kitces Report Evaluating Financial Planning Strategies And Quantifying Their Economic Impact
Dalbar Quantitative Analysis of Investor Behaviour (QAIB)
Royal London Value of Advice

Although these studies make it clear that that there are a range of factors which can be used to calculate the value, it’s important to recognise that there are many aspects which you can’t put a number on – the peace of mind, reassurance and certainty a good financial adviser gives clients when planning for their future.

Vanguard’s study defines the adviser’s Alpha as “the difference between the return that investors might achieve with an adviser and the return that they might have achieved on their own”.

The Numbers

The research reports above resulted in a range of percentages relating to the Adviser Added Value (AAV) in each of the key areas of financial planning.  The minimum and maximum annualised AAV percentages from these studies are detailed below:

Financial/Tax Planning- 0.50% to 0.70%
Asset Allocation- 0.28% to 0.67%
Behavioural Coaching- 1.50% to 2.00%
Withdrawal Strategies- 0.23% to 0.75%
Investment Selection- 0.45% to 0.82%
Rebalancing- 0.35% to 0.44%
Total- 3.31% to 8.69%
If we take the lowest percentage in each category and compound the effect forward over time the resulting enhancement to client wealth can be significant.

Case Study 1

A client with an investment portfolio of £500,000 assuming the lowest percentage Adviser Added Value (AAV) of 3.31% per annum, less the payment they make to their adviser of, say, 0.6% per annum, reducing the AAV to a net figure of 2.71% per annum.

Market Return (%)*With Net AAV (%)Market Return (£)With Net AAV (£)
1 Year3.54%6.25%£517,700.00£531,250.00
3 Years11.00%19.95%£555,000.00£599,750.00
5 Years19.00%35.41%£595,000.00£677,050.00
10 Years41.61%83.35%£708,050.00£916,750.00
15 Years68.51%148.28%£842,550.00£1,241,400.00
20 Years100.52%236.19%£1,002,600.00£1,680,950.00
25 Years138.62%355.22%£1,193,100.00£2,276,100.00
*The assumed market return is based on a medium risk portfolio constructed with 60% equities returning 4% per annum, 38% fixed income returning 3% per annum and 2% cash returning 0% per annum. This is not necessarily illustrative of actual returns that one might receive as the value of investments can go down as well as up and clients may not receive back the full amount invested.
The Financial Conduct Authority does not regulate tax advice.