How important is having a financial advisor when it comes to wealth accumulation? You’ll get different answers to that question from different people. And real scientific studies have been scarce.
But recently, the Center for Interuniversity Research and Analysis on Organizations (CIRANO) released just such a research paper. “Econometric Models on the Value of Advice of a Financial Advisor”, by researchers Professor Claude Montmarquette and Nathalie Viennot-Briot, uses econometric modelling and a large sample of Canadian households to demonstrate convincingly that having a financial advisor contributes positively and significantly to the accumulation of financial wealth.
The paper provides important insights on how the process of advised wealth accumulation actually works, including new evidence that:
1. Advice has a positive and significant impact on financial assets after factoring out the influence of close to 50 socio-economic, demographic and attitudinal variables that also affect individual financial assets;
2. The positive effect of advice on wealth accumulation cannot be explained by asset performance alone: the greater savings discipline acquired through advice plays an important role;
3. Advice positively impacts retirement readiness, even after factoring out the impact of a myriad of other variables; and
4. Having advice is an important contributor to levels of trust, satisfaction and confidence in financial advisors—a strong indicator of value.