£40,000: the value of advice
Advised investors tended to save more and are more likely to make investments in the stock market, which has helped their wealth grow over time.
The effect is more marked for those who are ‘just getting by’ and advised, who are 9.7% more likely to save and 10.8% more likely to invest in the equity market. The ‘affluent but advised’ were 6.7% more likely to save and 9.7% more likely to invest in the equity market than the equivalent non-advised group.
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 (total £43,245). If used to buy an annuity, this pension wealth would be equivalent to around £1,580 per year.
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 (total £39,895).
The report, ‘The Value of Financial Advice’ analyses data from the largest representative survey of individual and household assets in Great Britain, the Wealth and Assets Survey. It covers those who had received advice in the 2001-2007 period and assessed their wealth by 2012-14. It also sought to adjust for certain behaviours so the data was not skewed by, for example, the fact that wealthier people have greater propensity to save,
The report found that 9 in 10 people are satisfied with the advice received, with the clear majority deciding to go with their adviser’s recommendation.
Financial advice remains relatively lightly used: 16.8% of people saw an adviser in the years 2012-2014. The two main considerations for people seeking advice are whether the individual trusts an independent financial adviser to provide advice, and the individual’s level of financial capability.
The report makes a series of recommendations to raise demand for financial advice including:
- Using advice to support the auto-enrolled – duty on employers to ensure staff can access the best information and advice on their pensions.
- Mandating default guidance for those seeking to access their pension savings – to ensure people can get crucial information in a complex marketplace and avoid worst outcomes.
- Helping to create informed consumers through continued development and roll out the pensions dashboard.
- Ensuring regulators continue to place emphasis on access to independent financial advice.
Steve Webb, director of policy, Royal London, said: “These results look at people who were receiving advice in the early 2000s and ten years later, they are tens of thousands of pounds wealthier. We have a real challenge in getting younger people engaged in pensions and this shows they are getting a big impact even over ten years. If we can engage people ten years out, it is really encouraging.
“It is also encouraging that people of more modest means are getting more bang for their buck. When we are talking about financial advice, it’s not just for the wealthy, the mass market is important and therefore we need breadth of access. It also shows the value of staying invested at a time when people are shovelling money into cash ISAs with negative real returns year-on-year.”