Putting a number on the value of financial advice
People often think that financial planning is about being sold products and that it’s an entirely transactional experience. This couldn’t be further from the truth. The intangible mental and fiscal benefits that financial planning can bring to your life are numerous. To fully quantify the benefits of financial planning is no easy task, but not impossible. We’ve dug into the research out there and come back with some rather interesting findings…
A study was carried out by the International Longevity Centre (ILC) UK, who tracked the wealth of thousands of people who received financial advice between 2004 and 2006, looking at the financial outcomes of those who received financial advice and those who didn’t.
In order to arrive at their conclusions, the ILC considered the amount of accumulated pensions wealth as well as net financial wealth, which included current accounts, ISAs, life insurance, shares and the like.
The results found that those who took financial advice were £47,706 better off than those who didn’t. The results were split between a £30,991 increase in pension wealth and a £16,715 increase in other financial assets.
ILC also found that the pension pots of those who took ongoing advice were on average 40 per cent larger than those who had only taken advice once at the beginning.
The study was commissioned by Royal London. The director of policy, Sir Steve Webb, had this to say:
“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.”
Following these results, Royal London has called on policymakers to work together to get more people to see the value of advice and the potential impact it could have on their retirement income. Which is excellent progress.
Ultimately, it’s great to see consistent and positive outcomes for those who take the time to utilise ongoing professional financial advice. Having someone in your corner to guide your finances can make all the difference to your life and the way you use your money – you just need to take that first step.
If you’re interested in improving your financial wellbeing or have any questions about what we’ve discussed, feel free to get in contact. We’re only a phone call or email away.