Although we would never make presumptions about our own clients, a new report has found that those who received financial advice were on average £40,000 better off than those who didn’t.
Research, published by the International Longevity Centre and Royal London, found those who received financial advice between 2001 and 2007 accumulated significantly more liquid financial assets and pension wealth than those who didn’t by 2012 to 2014.
The report, called The Value of Financial Advice, examined the impact of advice on two groups: the ‘affluent’, who were wealthier and more likely to have degrees and be homeowners, and the ‘just getting by’, who were less wealthy and more likely to be single, rent and have lower education levels. It found that the ‘affluent and advised’ accumulated on average £12,363 (or 17 per cent) more in liquid financial assets than the ‘affluent but not advised’ group, and £30,882 (or 16 per cent) more in pension wealth, making a total of £43,245. Meanwhile the ‘just getting by and advised’ accumulated on average £14,036 (or 39 per cent) more in liquid financial assets than the ‘ just getting by but not advised’ group, and £25,859 (or 21 per cent) more in pension wealth, bringing a total of £39,895.
The ‘affluent and advised’ group were 6.7 per cent more likely to save and 9.7 per cent more likely to invest in the equity market than the equivalent non-advised group. Of the ‘just getting by and advised’ group 9.7 per cent were more likely to save and 10.8 per cent more likely to invest in the equity market than the equivalent non-advised group. Those who had received advice in the 2001 to 2007 period also had more pension income than their peers by 2012 to 2014. The ‘affluent and advised’ group earned £880 (or 16 per cent) more per year than the equivalent non-advised group while the ‘just getting by and advised’ group earned £713 (or 19 per cent) more a year than their peer non-advised group.
Unfortunately for many, less well off people the cost of financial advice is beyond them as advisory fees have been driven up by regulatory costs and indeed by the fact there are fewer advisers in the industry . The benefits for doing so are just not that obvious for these individuals. So it is not as straight-forward as commentators saying ‘we need to get more people through the front door taking financial advice’. In some cases also individuals are ‘forced’ to obtain financial advice and incur fees where they do not want to and where perhaps the decision is clear what to do. For example, with final salary pension transfers, the FCA insists that advice is taken if the transfer value is £30,000 or more.
So the market place is not perfect. But for those who are in a position to take financial advice, we trust that for most they see the advantages of doing so.