Financial advice can boost wealth by £47,000 in a decade, study finds

09 Dec 2019

Financial planning can help you take stock of your life and finances and build up funds for the future, whatever your plans and expectations.

But have you ever wondered about the actual value of financial advice?

Well, according to new research from Royal London and the International Longevity Centre - UK (ILC), taking specialist advice on your pensions and investments could leave you nearly £50,000 better off within a decade.

Quantifying the value of financial advice has always been a challenge because people who consult an adviser tend to have different characteristics from those who do not, Royal London explained.

The new study -- based on a detailed analysis of the government's Wealth and Assets Survey -- controls for those differences, and it suggests that those who took advice around the turn of the century were on average over £47,000 better off (in pensions and financial assets) a decade later than those who did not.

One of the reasons is because those who take advice are more likely to invest in assets that offer greater returns though with greater risk.

Interestingly, the research also shows 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 was an extra 24% in financial wealth (e.g. shares, ISAs, bank accounts) compared with 35% for the non-affluent group. On pension wealth, the uplift was 11% for the affluent group compared with 24% for the non-affluent.

Fostering an ongoing relationship with a financial advisor may also lead to better financial outcomes, the study suggests: those who were still taking advice at the end of the period had pension pots on average 50% higher than those who had only taken advice at the beginning of the period. However, Royal London noted that 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 on the findings, 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."

ILC 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."

At Fidelius, we believe in a full approach to financial planning -- it's about looking at the whole picture to really understand all aspects of your life and finances. Then once we know where you are, and where you want to go, we can give you really informed and tailored advice to help you achieve your goals and secure your future. Why not get in touch with us today?