What advice really delivers. And which figure you shouldn’t believe.

Five points for people with 30 seconds to spare

1. The biggest item isn’t product selection. It’s the question of whether you sell in the crash.
2. This part alone is put at up to 1.5 per cent a year. In the research it’s called behavioural coaching. In plain words, it’s about keeping someone from doing the wrong thing.
3. Three big houses have modelled the value. Vanguard arrives at up to 3 per cent net, Morningstar at around 1.82 per cent, Russell at up to 3.75 per cent.
4. One much-quoted figure you should ignore all the same. The famous 6.4 per cent is a self-assessment by respondents, not a measured return.
5. Two-thirds of all lost clients don’t leave because of the return. They leave because nobody took care of them.

The long version, for one or two cups of coffee.

The question that follows the cost calculation

In July, I wrote two articles about what free advice really costs. What it costs the client and what it costs the adviser.

Then came the question I should have asked myself. Good that you know what it costs. And what does it deliver?

That is a fair question, and it is more uncomfortable than it sounds. Because the honest answer is not ‘more return’. The honest answer is more complicated and, in the end, more convincing.

Where value is actually created

In the research on this, the same four sources crop up time and again.

The first is lower product costs. If you know what to look for, you pay less for the same thing. That is the obvious part, and the smallest.

The second is disciplined rebalancing. That is, regularly turning back to the original allocation. It always feels wrong, because you sell what has done well. That is exactly why almost nobody does it alone.

The third is tax-sensible structures. Which pot, which wrapper, which order when withdrawing. Over decades, the amounts at stake here are worth taking a closer look at.

And the fourth is the one this is actually about.

The part nobody puts on the bill

In the studies it is called behavioural coaching. Translated, it means that someone keeps you from doing the wrong thing at the wrong moment.

This item alone is put at up to 150 basis points a year. So up to 1.5 per cent. In almost every model, that is the largest single contribution, bigger than product selection and taxes together.

And investors evidently see it the same way. In a survey of 1,010 advised investors and 203 advisers in Germany, 72.8 per cent explicitly named help against emotional reactions to market movements as a value. 61.9 per cent even want to be kept from chasing returns.

That matches my day-to-day work almost exactly. Fifteen years ago, I had to talk people into buying shares at all. Today, I sometimes have to talk someone out of putting their BAföG repayment into an American index with leverage.

The job has turned around. The task has stayed the same.

What the big houses have calculated

Three models are regularly cited, and they come to the same result from different directions.

Vanguard has been working on a model called Adviser’s Alpha for around 25 years and arrives at up to 3 per cent net a year.

Morningstar, under the name Gamma, examined what good decisions in retirement are worth and arrives at up to 29 per cent more retirement income. Converted into an annual return, that is around 1.82 per cent.

Russell Investments lands at up to 3.75 per cent a year.

The survey the German figures come from is called ‘Client Connect’ and comes from Vanguard. You can download it in full here and read it for yourself.

Important. These are model calculations, not guarantees. They are calculations of what arises under certain assumptions. Nobody can promise you it will turn out that way for you, me included.

The figure I disagree with

The same study contains a figure that is currently being passed around the industry with great diligence. Advised investors put the value of their advice at an average of 6.4 per cent a year, after fees.

This figure is currently being sold as proof of the value of advice. It isn’t.

It is a self-assessment by respondents. People were asked what they believe, and they answered. Nobody did the maths. It is a snapshot of sentiment, not a measurement.

The finding that doesn’t surprise me

The same survey asked why clients leave their adviser.

Around two-thirds leave for personal reasons or because of the service. Only just over a quarter leave because of performance.

On top of that, 54.5 per cent of investors would like to meet in person more than once a year. In reality, only 46.3 per cent get that.

There’s a gaping gap. While everyone talks about automation and self-directed investors, there is an unserved demand for more personal contact.

For years I have seen the demand for service. But anyone who takes money has to deliver service too. Nobody gets paid for merely existing.

That is exactly why my model looks the way it does. Not because I dreamt it up, but because the need is there and is too rarely served.

What this means for you

If you’re wondering whether guidance is worth its price, don’t do the maths with the return. That calculation goes both ways and proves nothing in the end.

Reckon with three questions instead.

How did you feel in April 2025, when the markets gave way noticeably within a few days? What did you do then? And what would you have done if there had been nobody to talk to?

Anyone who stays calm on all three questions doesn’t need me and should save themselves my fee. Anyone who gets unsure at the third has just found the biggest item in the whole calculation.

And there is a part no study measures. A client doesn’t know what they don’t know. I look into subjects before the tabloids discover them. By the time they get there, the game is usually already over. The difference lies not in knowing the future, but in dealing with it early enough.

Advice and service are not always products that yield a return. They are insurance against your own reaction.

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