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People who take financial advice '£40,000 better off'

For the affluent & on smaller incomes

People who receive either independent or restricted financial advice are on average £40,000 better off than their unadvised peers, research by the International Longevity Centre-UK (ILC-UK) has found. 

The research, supported by Royal London, found those who received financial advice between 2001-2007 had accumulated "significantly more" liquid financial assets and pension wealth than their unadvised counterparts by 2014.

The report ‘The Value of Financial Advice' examined the impact of financial advice on two groups - the ‘affluent' and the ‘just getting by'.

The affluent group was formed of a wealthier subset of people who were also more likely to have degrees, be part of a couple, and be homeowners. The 'just getting by' group was made up of less wealthy people with lower levels of education, be single, divorced or widowed, and renting.

The research analysed data from 5,000 people and households across the UK.

It found the ‘affluent, advised' accumulated on average £12,363 (or 17%) more in liquid financial assets than the 'affluent, non-advised' group, and £30,882 (or 16%) more in pension wealth, bringing the total value-add to £43,245.

Meanwhile the ‘just getting by, advised' accumulated on average £14,036 (or 39%) more in liquid financial assets than the 'just getting by, non-advised' group, and £25,859 (or 21%) more in pension wealth, bringing the total value added to £39,895.

The report also found financial advice led to greater levels of saving and investment in the equity market, with the 'affluent, advised' group 6.7% more likely to save and 9.7% more likely to invest in the equity market than their non-advised counterparts.

Similarly the 'just getting by, advised' group were 9.7% more likely to save and 10.8% more likely to invest in their equity market than their non-advised peers.

Those who had received advice in the 2001-2007 period also had more pension income than their peers by 2014, with the ‘affluent, advised' group earning £880 more per year than the equivalent non-advised group and the 'just getting by, advised' group earning £713 more than their counterparts.

ILC-UK also found nine in 10 people were satisfied with the advice received, with the clear majority deciding to go with their adviser's recommendation.

Trust in advisers

The report found those who said they trusted independent financial advisers were 12.5% more likely to take financial advice than those who did not express such trust, which, the report concluded, meant trust was a key determinant for demand for advice.

To raise the demand for financial advice, it recommends:

  • Using advice to support the auto-enrolled;
  • Mandating default guidance for those seeking to access their pension savings;
  • Helping create informed consumers through the roll out and development of the pensions dashboard;
  • Ensuring regulators continue to place emphasis on access to independent financial advice.

ILC-UK head of economics of aging Ben Franklin said the advice market was not currently working for everyone as only a small percentage of the population saw a financial adviser.

"The clear challenge facing the industry, regulator and government is therefore to get more people through the 'front door' in the first place," he said.

Royal London director of policy Steve Webb said the research demonstrated the "real return" in obtaining financial advice, adding: "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. More needs therefore to be done to overcome the barriers to advice."

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