It seems that investors who pay for advice in the UK are outperforming their self-directed counterparts by more than 25% a year, according to the latest Legg Mason Global Investment Survey.
The survey of more than 1,000 investors in the UK by Legg Mason Global Asset Management revealed that on average, advised investors achieved returns of nearly 7.5% in 2018, much higher than the 5.9% achieved by those who pick their own investments.
The outperformance means advised investors are generating a 27% higher return than their self-directed peers.
The difference in return is driven by significant differences in allocations over the past 12 months.
Have UK self-directed investors got too much in cash?
Of those surveyed, self-directed investors had nearly half of their savings (46.8%) in cash, on average, compared with just under a third (29.7%) for those who take financial advice, suggesting that people who pick their own investments tend to be much more cautious.
Instead of cash, advised investors were found to hold nearly four times as much in alternative investments, which include commodities and hedge funds. In total, advised investors had 12.6% in such assets versus just 3% of DIY investors’ portfolios.
The findings from the survey, which is now in its sixth year, were polled from 16,810 investors across the globe in total. Respondents had to have at least €10,000 to invest in the next twelve months.
Commenting on the findings, Alex Barry, Head of UK Distribution at Legg Mason, said: “There will always be those who prefer to choose their own investments – and there is nothing wrong with that – but our research shows a strong and clear correlation between taking advice and higher returns.
Legg Mason argues that the results show that there is no substitute for expert knowledge when it comes to investing. A good adviser will take a considered view on higher-risk investments and search for higher returns in areas that perhaps most self-directed investors wouldn’t, while at the same time ensuring that clients are adequately diversified to withstand any market shocks.
Now, there’s certainly no substitute for expert advice. If you are not confident in your ability to generate healthy returns, paying for the services of a good adviser is a sensible approach. Of course, investors need to be able to find that adviser in the first place – there is plenty of poor advice out there too!