"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."
Even allowing for the fact that some groups are more likely to seek advice than others, the research still shows that those who receive advice do better than an equivalent group who don’t. In fact the data shows that the proportionate impact is largest for those on more modest incomes.
Splitting the impact of financial advice into two groups, the ‘affluent’ and the ‘just getting by’, the figures show 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.
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.
Those who had received advice between 2001-2007 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, while the ‘advised just getting by’ group earn £713 (or 19%) more per year than the equivalent non-advised group.
Yet despite the advantages of receiving advice, only 16.8% of people saw an adviser in the years 2012-2014.
The two most powerful driving forces of whether people sought advice was whether the individual trusts an IFA to provide advice, and the individual’s level of financial capability.
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, 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, added: “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.”
