There is a new report by the International Longevity Centre (yes another that nobody has heard of) about the value of financial advice. Long story short, the research asked a wide range of people, over 91,000 households were surveyed (for the record, according to ONS there are about 27.1m households in 2016 of which 7.7m are one-person households). So it’s a far better survey than any of the cosmetic adverts you might see on TV, where number is invariably in the low 3-digits if you can read their faint printed disclosure). So this is a survey that I have a little more confidence in.
The headline is that anyone that took financial advice from someone qualified to provide it, was about £40,000 better off than those that didn’t when they had comparable wealth and socio-economic backgrounds. This was over 2012-2014. In essence, the report concluded that those that were advised were better savers and invested in assets that would or did grow. However only 16% of the general population take advice.
Affluent or Justing Getting By?
There were two key groups – “affluent” and “just getting by”. The affluent group generally had 17% more wealth due to being advised and the “just getting by” advised group had 39% more in liquid wealth and 21% more in pensions.
In short, (too late) getting advice will improve your wealth, in the timeframe considered, this was by an average of around £40,000 improvement in the period concerned. Whilst this is obviously helpful news to anyone considering financial advice, frankly I would expect a financial planner to add significantly more value than this (a multiple of £40,000). Some of which is measurable (financially) some is not (peace of mind, freedom from debt, retiring early, knowing your number). In fact if done properly, then a financial planner would expect to improve the value of the estate and retained value (post inheritance taxes). They would ensure a sufficient lifetime income – so that the money does not run out and minimise taxes, maximise reliefs. At Solomons we would also expect to improve investment and protection costs as well.
The Report Concludes
Directly quoting the report:
“Advisers must sell their added value: This report demonstrates the real value add of financial
advice – in terms of greater asset accumulation during working life and increased income in
retirement. Since those who receive advice accumulate more assets and have more retirement
income than those who don’t, this shows that advisers are good value for money. Post RDR,
people now understand what taking advice will initially cost them, but many of those who fail to
take advice are unlikely to know what the potential long term financial rewards are. It is up to the
advice sector to convince them.”
The Value of financial advice, A Research Report from ILC-UK July 2017
Cesira Urzi Brancanti, Ben Franklin and Brian Beach
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