According to a new report, advised Australians are 5.9 per cent a year better off than non-advised investors.

Despite tough conditions and rising inflation, the latest edition of Russell Investments’ Value of an Adviser Report has found that the potential value delivered by financial advisers to their clients’ investment portfolios has increased year on year to 5.9 per cent in 2023, up from 5.8 per cent in 2022.

Russell Investments managing director and head of distribution in Australia, Neil Rogan, said: “For the past two years advisers have increased their value to clients, proving yet again why they are the trusted expert in the room that Australians desire when there’s uncertainty in domestic and global investment markets.”

The areas that Russell Investments evaluates to calculate the value of an adviser include behavioural coaching, appropriate asset allocation, tax savvy planning and investing, choices and trade-offs, as well as the value of an adviser’s years of professional expertise, which the firm said was “priceless”.

“Too often non-advised investors make rash decisions and change investment strategies when there needs to be greater consideration for the longer term,” Mr Rogan said.

“This is where advisers become just as much a behaviour coach as a financial coach. In 2023, behavioural coaching alone could contribute 3.4 per cent to the value of investors’ portfolios.”

Asset allocation was valued at 1.2 per cent in 2023, with Russell Investments noting that this portion is responsible for more than 85 per cent of an individual’s investment outcome.

“Retail investors are more likely to recall individual stock performance rather than focusing on broader asset classes and the overall investment strategy. An adviser adds value by bringing a disciplined and sensible approach to meet their clients’ needs,” Mr Rogan said.

“Non-advised Australians can find themselves in a single strategy super product lumped with other members and not really addressing their long-term financial goals. The potential 1.2 per cent in value from an adviser achieved through carefully considered asset allocation can make a big difference to an investor’s outcome.”

Clients also receive 1.3 per cent in value on the back of their adviser’s tax savvy planning and investing skills, which Russell Investments said was “crucial to ensure clients’ portfolios don’t unnecessarily leak funds”.

“Investors need to look beyond their annual tax returns and recognise there are tax implications for many financial decisions now and into the future. Advisers can structure investment portfolios to be tax efficient and work through the complexities that come with tax planning, ultimately optimising their clients’ outcomes,” Mr Rogan said.

However, the firm added that there are areas of what an adviser provides that are not quantifiable, with retirement planning, life insurance and social security among these skills.

“Advisers act in many roles and are often guiding clients through their best and worst times in life. In many circumstances they are a sounding board, a voice of reason and an advocate,” Mr Rogan said.

“Beyond the technical skills it is vital that advisers are equipped to manage and communicate their value in building successful relationships and tailoring financial plans that give clients peace of mind.”

Ms Calleja said she caters to small- to medium-sized enterprise (SME) owners from different cultural backgrounds, religions, and faiths.

Firstly, she familiarises herself with her clients by connecting with them as human beings.

“When I first sit with them, I don’t even talk about their business. I get to know them as a person,” she told The Adviser.

“We hit it off because I learn about their family life, how long they’ve lived in Australia, who they live with, and who they have back home. I ask if they’re responsible for providing for their family back home.

“When you get to the nitty gritty of understanding what their financial position is like, you add value. Then, we talk about how we can help with their business.”

Ms Calleja’s comments came ahead of the Women in Finance Summit, where she and a panel of speakers will discuss how women in finance could navigate their clients’ cultural and religious practices and expectations to provide tailored services.

Connect with them as humans

Researching the clients’ cultural and professional backgrounds is key. This can be done by exploring their websites, LinkedIn profiles, mutual connections, and hobbies.

“For example, I had a client with a Torres Strait background. On his website, he’d written that his mum was his biggest influence. I told him that my mum is my biggest influence and asked him to tell me more about his mum,” Ms Calleja said.

“I try and find something that’s relatable. I need them to trust me so I can build rapport.”

Ms Calleja, whose firm provides SMEs with services such as accounting, bookkeeping, financial planning, estate planning, and succession plans, said having multiple touchpoints with clients is critical to understanding cultural nuances.

“I tell my clients from different cultural groups that I’m curious and intrigued. I ask them questions. I ask if it’s okay if I show up to their office wearing certain attire. But I also tell them that I want to be respectful of their culture, so I tell them that they don’t have to answer my questions if they don’t want to.

“My clients love that I’ve put myself out there and apologised before asking the questions. They appreciate that I’ve asked those questions with the intent to understand. You need to ask permission to ask certain questions.”

Trust gives you freedom

These conversations allow Ms Calleja to unearth whether her clients are passionate about their business or if it is “just a means to an end”.

“If they’re not motivated to drive their business forward, it’s my job to invigorate them.”

Building trust gives Ms Calleja the freedom to draw attention to her clients’ wrongdoings so they are compliant, she said.

“When I say to them that they’re not paying their staff appropriately, they trust me,” she said.

“My job is to make sure they’re compliant while maximising the benefits available to them and minimising tax in a legal way. I always say it takes more effort to do the wrong thing than the right thing.”

Broaden your horizon and network

When asked how other women in finance could service clients from diverse cultural backgrounds, Ms Calleja encouraged them to diversify their networks by attending different cultural events.

“Go to things like the Arab or Croatian Chamber of Commerce. Talk to other professionals there about how they deal with the different cultural nuances,” she said.

“Make your network more inclusive rather than just going to your local network or chamber. Meeting people from different backgrounds and cultures is the best education you can receive.”

Implementing processes to handle conflict resolution and setting boundaries in the early stages with clients are also crucial, Ms Calleja added.

“Educate your clients early on how the process works. Tell them how you would handle a situation when things go wrong,” she underscored.

“Whether they agree to work with you is their choice.”

To hear more from Lilette Calleja on how to support clients from diverse backgrounds, come along to the first-ever Women in Finance Summit 2023.

It will be held on Friday, 10 November 2023 at The Star, Sydney.

Click here to book your tickets and don’t miss out!

For more information, including agenda and speakers, click here.