Good financial planning finally has a value: 23% more in retirement Financial planners are familiar with alpha and beta as drivers of long-term investment portfolio returns; but now there’s a third letter to add to the lexicon – gamma – and according to Morningstar, it’s the value created that can be directly attributed to sound financial planning. Facebook Tweet LinkedIn Portfolios optimised using five techniques identified by David Blanchett, head of retirement research for Morningstar, generate 23 per cent more income in retirement for the average retiree. Advisers do more than just pick great investments, Blanchett says. Theres more to alpha and beta when it comes to the [investment] outcome. If you do it well, creating gamma for a client is worth a lot. This idea of gamma is that theres a benefit to advice. Advisers can help individuals, help them accomplish their goals better. This talks about five things [an adviser can do]. Its important to note that theres a lot more than five things advisers do for their clients. Five specific techniques Blanchetts analysis covers five specific financial planning techniques: Total wealth asset allocation Dynamic withdrawal strategy Annuity allocation Tax planning; and Liability-relative optimistation. So the question is, So what? If you do these five things what does it do for accomplishing their goal of achieving a better retirement? he says. So we ran a bunch of simulations and we find that if you do these five things for retirees, we get 23 per cent more income. For every $100 you could do on your own, without help, you get $123 with help. Its incredibly valuable. Someone who wouldnt do these things on their own, who doesnt understand things like annuities or total wealth allocation, has $100. The person with an adviser has $123. Then you might say, well advisers charge for their services; theyre going to charge someone a fee to implement this plan, you can say, OK,...
Posted on: Tue, 09 Dec 2014 01:14:57 +0000
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