A study by insurance company Royal London – conducted in partnership with the International Longevity Centre (ILC), a think tank on demographic change issues – has suggested that consumers may be around £40,000 better off if they take professional advice, compared to those who don’t have the benefit of this service.
Amongst consumers classed as ‘affluent’, the average benefits from seeking financial advice were calculated at £43,245. Affluent clients of financial advisers were found to have £12,363 more in liquid financial assets and £30,882 more in pension wealth than the average affluent consumer who didn’t get professional advice. Clients of professional advisers were also 6.7% more likely to save and 9.7% more likely to invest in the equity market.
Similar advantages were found to exist amongst consumers in the ‘just getting by’ economic group. Amongst ‘just getting by’ consumers, those who received advice had, on average, £14,036 more in liquid financial assets and £25,859 more in pension wealth, totaling £39,895 more. Where people in this grouping received advice, they were 9.7% more likely to save and 10.8% more likely to invest in the equity market.
Steve Webb, Director of Policy at Royal London, and who served as Pensions Minister in the 2010-15 coalition government, commented:
“This powerful research shows for the first time the very real return to obtaining expert financial advice. What is most striking is that the proportionate impact is largest for those on more modest incomes. Financial advice need not be the preserve of the better off but can make a real difference to the quality of life in retirement of people on lower incomes as well. The evidence shows that when people take advice they are overwhelmingly satisfied and benefit as a result. More needs therefore to be done to overcome the barriers to advice.”
Ben Franklin, Head of Economics of Ageing, at ILC-UK said:
“Our results show that those who take advice are likely to accumulate more financial and pension wealth, supported by increased saving and investing in equity assets, while those in retirement are likely to have more income, particularly at older ages.
“But the advice market is not working for everyone. A high proportion of people who take out investments and pensions do not use financial advice, while only a minority of the population has seen a financial adviser. Since advice has clear benefits for customers, it is a shame that more people do not use it. The clear challenge facing the industry, regulator and government is therefore to get more people through the “front door” in the first place.”
It is notable that both Mr Webb and Mr Franklin urged the government, and regulators, to do more to improve access to financial advice. The recent Financial Advice Market Review, jointly conducted by the Financial Conduct Authority and HM Treasury, aims to address this very subject.
The findings of the study may come as little surprise to many financial advisers. In contrast to the image of years gone by of an adviser being little more than a salesperson, today’s advisers are expected to maintain long-lasting relationships with their clients, and to continually monitor clients’ investments and financial position.
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.