Is advice valuable? Financial advice provides £47,000 wealth uplift in a decade

New research from Royal London and the International Longevity Centre:

  • Receiving professional financial advice between 2001 and 2006 resulted in a total boost to wealth (in pensions and financial assets) of £47,706 in 2014/16
  • The benefits of financial advice are potentially greater for those who are “just getting by” than for those we consider “affluent”
  • Fostering an ongoing relationship with a financial advisor leads to better financial outcomes

Last January, one of our blogs examined the financial gain when people received good financial advice. A study from ILC-UK showed that financial advice was worth more than £41,000 on average. Of course, we believe that we add real and significant value to our customers.

And new research, What it’s worth: Revisiting the value of financial advice from the ILC suggests that, holding other factors constant, those who took advice around the turn of the century were on average over £47,000 better off a decade later than those who did not.

One of the key findings from the research is that the proportionate impact of taking advice is greater for those of more modest means. For the ‘affluent’ group identified in the research, the uplift from taking advice is an extra 24% in financial wealth (eg shares, ISAs, bank accounts) compared with 35% for the non-affluent group. On pension wealth, the uplift is 11% for the affluent group compared with 24% for the non-affluent.

The research also found that those who were still taking advice at the end of the period had pension pots on average fifty per cent higher than those who had only taken advice at the beginning of the period. However, this result is not controlled for other differences in characteristics, so may at least in part reflect greater engagement by those who have larger pension pots.

Commenting, Steve Webb, Director of Policy at Royal London said:

“Many of those who receive financial advice can testify to its value but it has always been difficult to quantify.  This research uses the latest statistical methods to identify a pure ‘advice effect’ and it is strikingly large.  If financial advice can add £40,000 to your wealth over a decade compared with not taking advice, it is incumbent on government, regulators, providers and the advice profession to work together to make sure that more people are sharing in this uplift”.

International Longevity Centre Director, David Sinclair added:

“The simple fact is that those who take advice are likely to be richer in retirement.  But it is still the case that far too many people who take out investments and pensions do not use financial advice. And only a minority of the population has seen a financial adviser. We must now work together to get more people through the ‘front door’ of advice”.

Source: https://www.royallondon.com/media/press-releases/2019/november/financial-advice-provides-47000-wealth-uplift-in-a-decade–new-research-from-royal-london-and-the-international-longevity-centre/

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