Personalised financial advice can add over 3% annual value post fees: Study

Behavioural coaching, tax planning and regular portfolio reviews created the biggest gains for investors

Most people judge a financial adviser by one metric: Whether their investments beat the market. But a new study suggests that the biggest value of professional financial advice may actually come from helping investors avoid costly mistakes rather than picking winning stocks.

 

According to a study by 1 Finance Magazine, personalised financial advice generated an annual net value of 153 to 301 basis points (1.53 per cent to 3.01 per cent) across four Indian households, even after deducting advisory fees. The study argues that the benefits of structured financial planning extend well beyond investment returns, with behavioural coaching emerging as the single largest contributor to long-term wealth creation.

 

 

Looking beyond investment returns

The study says investors often evaluate advisers only on portfolio performance against a benchmark such as the Nifty or a fixed deposit. However, this approach overlooks several financial decisions that can have a meaningful impact on long-term wealth.

 

These include reducing high-cost debt, improving tax efficiency, restructuring insurance policies, correcting nomination details, planning for inheritance, managing cash flows and ensuring investments remain aligned with financial goals. According to the report, these actions rarely appear in conventional performance reports despite adding measurable value over time.

 

The researchers grouped advisory services into four broad areas:

 

Course correction: Fixing financial decisions that are already costing money, such as expensive loans or unsuitable investment products.

 

Goal planning: Creating investment and savings strategies based on future financial goals.

 

Behavioural coaching: Helping investors avoid emotional decisions during periods of market volatility.

 

Continuous monitoring: Regularly reviewing investments, taxes, insurance and financial plans throughout the year.

 

Behavioural coaching delivered the biggest benefit

Among all four categories, behavioural coaching delivered the highest value across every household studied.

 

According to the report, this component alone contributed 91 to 169 basis points annually, regardless of the investor's age, city or wealth level. The study suggests that preventing panic selling during market corrections, discouraging speculative investing and helping clients stay committed to long-term financial plans can create more value than trying to outperform the market.

 

Four households, different challenges

The study analysed four Indian households from Hyderabad, Delhi, Bengaluru and Mumbai, each with different financial situations.

 

A Delhi family was dealing with stock and derivatives trading, multiple life insurance policies, a large home loan and plans to pause systematic investment plans (SIPs). Another Bengaluru household had nearly two-thirds of its wealth tied up in real estate but lacked adequate liquid investments to fund future goals.

 

In every case, the study found that the estimated value created through financial advice exceeded the advisory fee by a significant margin, with value-to-fee ratios ranging from 11:1 to 20:1. Net annual value after fees ranged between 153 and 301 basis points. 

In simple terms, if a portfolio worth Rs 1 crore gains an additional 2 per cent through better financial planning, tax savings and disciplined investing, that could translate into roughly Rs 2 lakh of extra value over a year. Actual outcomes, however, depend on the investor's financial circumstances and market conditions.

 

Why financial planning goes beyond investing

The study highlights that the role of an adviser increasingly extends beyond selecting mutual funds or stocks.

 

It identified several areas where structured financial planning can improve outcomes, including:

 

• Optimising mutual fund costs and consolidating investments.
• Managing debt and improving home loan repayments.
• Claiming available tax deductions and planning capital gains.
• Reviewing insurance cover as life circumstances change.
• Maintaining emergency funds and managing cash flows.
• Updating nominations and estate planning documents.

 

Study says value lies in preventing mistakes

Animesh Hardia, Partner and editor-in-chief of 1 Finance Magazine, said the most consistent source of value came from helping clients avoid poor financial decisions.

 

He said behavioural coaching, such as encouraging investors to remain invested during market downturns or preventing avoidable mistakes, was the aspect of financial advice that traditional performance reports fail to capture, despite often making the biggest difference to long-term outcomes.

 

Jeet Marwadi, founder and managing director of 1 Finance, said the study was inspired by global research on measuring the value of financial advice. He said the findings suggest that preventing costly mistakes, maintaining investment discipline and providing continuous oversight can create measurable benefits that outweigh the cost of professional advice for many households.

 

A limited study, not a universal conclusion

The report is based on four real Indian household case studies rather than a nationally representative sample. It also assumes certain long-term investment returns, prevailing tax rules and actual implementation of the advisers' recommendations.

 

As a result, the findings should be viewed as an illustration of how comprehensive financial planning can create value, rather than a guarantee of similar outcomes for every investor. The report also notes that actual results will vary depending on market conditions, individual financial behaviour and changes in tax laws.