People who take financial advice are typically £40,000 better off than those who do not, new research suggests.
A report by the International Longevity Centre UK (ILC-UK) tracked the wealth of people who received financial advice between 2001 and 2007 versus those who did not.
It found both affluent and poorer consumers increased their wealth faster after taking financial advice.
By 2014, the ‘affluent and advised group’ accumulated 17% more on average in liquid assets than the ‘affluent and non-advised group’, plus 16% more in pension wealth. In cash terms, these consumers were £43,245 better off than those without advice during the survey period.
Poorer consumers who took advice accumulated an average of £39,895 more wealth than those who went unadvised.
Yet despite the financial advantages, many people said they did not take advice because they had concerns over the cost and trustworthiness of advisers. The report says that just 16.8% of people saw an adviser during the survey period.
The ILC-UK is calling on companies to provide pension advice to employees as standard and for the government and industry to continue developing the “pension dashboard” – which will enable consumers to see all of their pension pots in one place online.
‘Only a minority of the population has seen a financial adviser’
Ben Franklin, head of economics of ageing at the ILC-UK, says: “Our results show that those who take advice are likely to accumulate more financial and pension wealth, supported by increased saving and investing in equity assets, 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 at Royal London – which supported the report, says: “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.”