Sometimes it’s hard to put a value on receiving financial advice, with many believing it is not worth the cost.
But mutual insurer Royal London and the International Longevity Centre (ILC) have managed to put a number on it.
According to their study, people who received professional financial advice on their pensions and assets between 2001 and 2006 saw their wealth increase by £47,706 ($61,467, €55,904) a decade later, compared to those who did not received advice.
They got roughly £31,000 extra in pension wealth and £16,000 in other financial wealth.
Even modest wealth can grow
The research discovered that the boost is more prominent for those of “more modest means”.
Affluent people saw an uplift of 24% in their non-retirement related finances, compared with 35% for the ‘modest’ group.
A similar proportion was found on pension wealth, with 11% and 24% increases, respectively.
Royal London and the ILC believe this is because those who take advice are more likely to invest in assets offering greater returns, albeit with greater risk.
“Across the whole sample, the impact of taking advice is to add around eight percentage points to the probability of investing in equities,” they said.
Urge more people to seek advice
A further discovery showed that those still receiving advice have a 50% higher pension pot than those who had only taken advice for a specific period of time.
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.”
International Longevity Centre director David Sinclair said: “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.”
