ILC-UK, supported by Royal London, found that those who received financial advice between 2001-2007 accumulated significantly more liquid financial assets and pension wealth than their unadvised equivalent peers by 2012-2014.
The report, ‘The Value of Financial Advice’, allows for the fact that some groups are more likely to seek advice than others and still shows that those who receive advice do better than an equivalent group who don’t.
Affluent or getting by
The report examines the impact of financial advice on two groups, the ‘affluent’ and those ‘just getting by’.
The ‘affluent’ group is formed of a wealthier subset of people who are also more likely to have degrees, be part of a couple, and be homeowners.
The ‘just getting by’ group is formed of a less wealthy subset who are more likely to have lower levels of educational attainment, be single, divorced or widowed and be renting.
The research found that the ‘affluent but advised’ accumulated on average £12,363 (or 17%) more in liquid financial assets than the affluent and non-advised group, and £30,882 (or 16%) more in pension wealth.
This equated to £43,245 in additional wealth.
The ‘just getting by but advised’ accumulated on average £14,036 (or 39%) more in liquid financial assets than the just getting by but non-advised group, and £25,859 (or 21%) more in pension wealth.
This equated to £39,895 in additional wealth.
Those who had received advice in the 2001-2007 period also had more pension income than their peers by 2012-14.
The ‘affluent but advised’ group earn £880 (or 16%) more per year than the equivalent non-advised group.
The ‘just getting by but advised’ group earn £713 (or 19%) more per year than the equivalent non-advised group.
However, while the report found that nine out of 10 people are satisfied with the advice they get, only 16.8% of people saw an adviser between 2012 and 2014.
Additionally, among those who took out an investment product in the last few years, around 40% did not take advice. This rose to 78% for those who took out a personal pension.
More people through the door
Ben Franklin, head of economics of ageing, ILC-UK said: “Our results show that those who take advice are likely to accumulate more financial and pension wealth, […] while those in retirement are likely to have more income, particularly at older ages.
“But the advice market is not working for everyone. A high proportion of people who take out investments and pensions do not use financial advice, while only a minority of the population has seen a financial adviser. Since advice has clear benefits for customers, it is a shame that more people do not use it.
“The clear challenge facing the industry, regulator and government is therefore to get more people through the ‘front door’ in the first place.”
Steve Webb, director of policy, Royal London said: “This powerful research shows for the first time the very real return to obtaining expert financial advice. What is most striking is that the proportionate impact is largest for those on more modest incomes.
“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. The evidence shows that when people take advice they are overwhelmingly satisfied and benefit as a result.
“More needs therefore to be done to overcome the barriers to advice,” said Webb.