A LinkedIn post caught my eye recently. It used a mocked-up receipt to tally the “cost” of not getting financial advice: a crashed portfolio, extra tax, a clawed-back Age Pension and missed growth. Its message is blunt: making financial mistakes is very costly!
I have written before about how to assess whether financial advice is worth paying for. I still think the size and complexity of your financial situation are the right starting points. However, this post prompted me to consider whether my earlier blog focused too heavily on these practical considerations.
Russell Investments’ 2026 Value of an Adviser Report estimates that advice adds approximately 5.5% p.a. Behavioural coaching accounts for 2.8%, which is more than half that value. Vanguard’s equivalent research suggests advice can add 3% p.a. or more, with behavioural coaching again making a substantial contribution. However, I have always been sceptical of these estimates. After all, the reports are prepared by businesses whose main customers are financial advisers, so they have a commercial interest in presenting advice favourably.
Much of this behavioural value depends on the assumption that, without an adviser, an investor would make poor decisions. They might panic when markets fall, chase recent returns or keep changing their investment strategy. That may be a reasonable assumption for the average investor. But does it apply to someone who already follows a clear, rules-based investment framework? If you have sound rules and consistently follow them, how much additional value does behavioural coaching provide?
I wanted to examine what these reports measure and assess what a rules-based approach can, and cannot, replace.
The assumptions behind the claimed value of advice
Russell Investments has published research on the value of financial advice annually since 2019. Its headline estimate has gradually declined from 5.9% p.a. in 2023 to 5.5% p.a. in the 2026 edition. The latest report attributes this value to 3 components:
- Appropriate asset allocation: 1.5%.
- Behavioural coaching: 2.8%.
- Tax-savvy planning: 1.2%.
Russell identifies 2 further benefits: guidance on choices and trade-offs, and adviser expertise. It does not put a figure on either, because their value varies too much or is difficult to quantify.
Vanguard’s research reaches a similar conclusion. Its Advisor’s Alpha framework, now in its 25th year, estimates that advice can add 3% p.a. or more. It draws on 8 components, including asset allocation, rebalancing, choosing which structures hold different investments, tax-efficient withdrawals and, since 2025, tax-loss harvesting.
In separate case-study research, Vanguard modelled a hypothetical young professional, Tristan, who held a concentrated share portfolio and panicked when markets fell. Reducing his excess cash holdings and bias towards local shares was estimated to add 1.26% p.a. Helping him stop chasing performance and selling in a panic was estimated to add another 0.66% p.a.
I am sceptical of headline figures like these, as I wrote when Russell published its 5.9% estimate. Much of the calculated value depends on what the investor is assumed to do without advice. If the comparison assumes they make costly mistakes, an adviser who prevents those mistakes will look valuable. Change that starting assumption and the estimated benefit changes substantially.
However, the behaviour these reports describe is real. Investors chase recent returns, panic during downturns and hold too much cash. These mistakes cost money. What interests me is how much of that cost investors can avoid by adopting clear investment rules and consistently following them. How much additional value does an adviser provide once that discipline is already in place?
The mistakes investment rules can and cannot prevent
When I examine the mistakes behind these estimates, I think it is useful to distinguish between 2 categories.
Firstly, there are portfolio design and investment process mistakes. Holding a concentrated share portfolio. Leaving too much money in cash. Replacing an underperforming ETF with last year’s winner – returns chasing. These problems often reflect the absence of a sound investment framework.
An evidence-based, rules-based approach, such as the one I outline in Wealth by Design, should address much of this. If your framework requires a globally diversified, low-cost portfolio, regular investment of surplus cash and rebalancing using new capital, you have already decided how to invest, reducing the scope for mistakes. You do not need to keep deciding which market or ETF looks most attractive. You have a process to follow. Following it still requires discipline, but it substantially reduces the number of discretionary decisions you need to make.
Secondly, there are mistakes arising from complexity or gaps in knowledge and experience. These include choosing appropriate investment structures, managing super contributions and understanding when strategies such as downsizer contributions or a transition-to-retirement pension are available and worthwhile.
Consider something as common as deciding how much to salary sacrifice into super. The appropriate amount depends on the applicable contribution cap, your income, existing contributions and personal circumstances. A rule can remind you to review this annually. It cannot, by itself, provide the answer. You still need current information and the knowledge to apply it correctly.
The same applies to tax minimisation strategies and whether a particular ownership structure suits your circumstances. Even a perfectly disciplined investor can make a mistake if their knowledge is inadequate.
This distinction matters when assessing the claimed value of advice. Where behavioural coaching estimates include correcting a poorly constructed portfolio or replacing an inconsistent investment process, a sound rules-based framework should capture much of that benefit, provided the investor follows it. You don’t necessarily need an advisor to achieve that.
The knowledge and complexity component is different. Personal discipline does not automatically give you the technical knowledge to assess a strategy or keep it current. That remains a strong case for advice, even for investors who are perfectly capable of sticking to their investment plan.
Why knowing what to do is not always enough
There is a third category: being able to follow your rules when your instincts are telling you to do something else. This is where investment discipline is truly tested, particularly when markets fall sharply.
Firstly, there will always be the temptation to override your rules. Your plan says to stay invested or invest surplus cash. But falling prices, alarming headlines and a portfolio balance shrinking each day make you want to stop. Following a rule is relatively easy when markets are rising and your strategy is working. The real test comes when following it feels most uncomfortable and potentially wrong.
Secondly, there is a confidence gap. An investor can understand the rule, agree with the reasoning and still lack the confidence to act without reassurance. They already know what to do. They want someone they trust to confirm that it remains the right decision. In my experience, this is one of the most common reasons clients seek our input, even when they already know the answer.
Thirdly, there is always doubt that “this time is different”. The GFC and COVID each presented unfamiliar circumstances, and nobody knew exactly how events would unfold. It is easy to look back now and say investors should have stayed the course. Making that decision while events were unfolding was much harder. What you confidently say you would do in a hypothetical downturn may bear little resemblance to how you respond when your own money is at stake.
Take that thought a step further. Imagine a global conflict on the scale of a third world war, causing markets to fall sharply. Most readers have never experienced anything comparable. Having stayed invested through the GFC would not necessarily tell you how you would respond.
The honest test is to imagine facing circumstances well beyond your experience, with no certainty about what happens next. Would you still follow your rules? And if your plan called for investing more, would you have the confidence to do it?
What did March 2020 reveal about your discipline?
A more useful test than asking whether you are disciplined is to imagine markets suddenly falling 30%, driven by a crisis nobody anticipated. Would you be comfortable investing a reasonable amount of money while prices were falling and the outlook remained uncertain?
It is easy to say yes when markets are calm. A better guide is what you actually did in March and April 2020. The timing matters here: investing in May or June does not demonstrate the same conviction. Did you keep investing, or did you move to cash or a more conservative investment mix and wait until things felt safer before returning? If you did the latter, it is worth acknowledging that now, before your discipline is tested again.
A rules-based framework only works if you follow it, including when doing so feels uncomfortable. Following 6 rules out of 7 rules 80% of the time just isn’t good enough. It’s in times of uncertainty that are precisely when a framework is most valuable. Abandoning it then can undo years of otherwise sensible investing.
Decide where you need help before the next crisis
If experience gives you confidence that you will follow your rules even when doing so feels deeply uncomfortable, a disciplined, rules-based approach can deliver much of the benefit attributed to behavioural coaching. It should address many portfolio design and investment process mistakes.
However, discipline alone does not resolve gaps in technical knowledge or the complexity of your circumstances. Those remain separate reasons to seek advice.
There is a third reason to consider advice that is separate from discipline or knowledge: economies of scale. As I discussed in my 2024 blog, the size of your portfolio has a substantial bearing on whether advice is worth paying for.
If you have tens of thousands of dollars invested, advice may need to improve your returns by several percentage points each year just to cover the fee. That is an almost impossible hurdle, which often makes a DIY, rules-based approach more economical at smaller balances.
However, the maths changes as your portfolio grows. On a $2 million portfolio, an additional return of 0.5% p.a. is worth $10,000 a year. If that benefit exceeds the advice fee and can be sustained, the improvement after fees can compound into a substantial amount over time.
At that size, advice can make financial sense even if you have the discipline and knowledge to manage your investments yourself. Being capable of doing it yourself does not necessarily mean doing so will leave you financially better off.
If you suspect that your instincts or a lack of confidence might override your rules under pressure, it is better to recognise that now. As I have written before, whether you seek professional advice is one of a small number of important lifetime decisions that can materially shape your financial outcomes.
Another option is to commit to speaking with someone you trust, and whose advice you will listen to, before acting out of panic. The important step is to make that commitment while you are thinking clearly, rather than trying to find reassurance in the middle of a crisis.
None of this necessarily requires paying for advice indefinitely. It requires an honest assessment of when your discipline is most likely to falter, and a plan for getting the support you need at that point.
