"Other factors are at play when it comes to financial wellbeing, not least our awareness of what we want to achieve with our money, a clear vision of our future self and constructive social comparison when it comes to wealth."
As an industry we’re typically very good at making people wealthier. Financial advice is an invaluable service and establishing factors like what a client can afford to save, where they should be investing and doing so in a tax efficient way pays back many times over across the years.
All the evidence shows a strong correlation between financial advice and good financial wellbeing and our own index found those with an adviser had nearly three times as much in long-term savings than the rest of the population, as well as lower levels of unsecured debt.
But this is really only half the story as other factors are at play when it comes to financial wellbeing, not least our awareness of what we want to achieve with our money, a clear vision of our future self and constructive social comparison when it comes to wealth.
While those with a financial adviser score higher on financial measures, our index found that more than one in five people with a financial adviser have only a vague sense of what gives them joy or purpose, both of which are essential to happiness. Joy is about the enjoyment we take from activities, whether that be watching our favourite sports team or spending time with friends, while purpose is about the meaningful activities like raising children, caring for relatives or helping out at a charity for example. Advised clients are in a better position than the population as a whole, but not significantly so, as around a third of the population said they only had a vague sense of what gave them joy and purpose.
Similarly, while around three-quarters of those with an adviser agreed they had a financial plan, only 44% said they had a concrete picture of their future self in ten years’ time, compared to 29% of the population as a whole. Despite their relative wealth, many advised clients said they often feel dissatisfied with how well they were doing relative to others.
What this suggests is that in many respects advised clients are wealthier but don’t necessarily have a better relationship with their money. Too few people have really questioned what their money is for and the options it can open up, or pictured the person they want to be in the future or simply taken the time to realise just how well off many of them are.
For financial advisers there’s therefore an opportunity to really build their relationships with clients and find out more about their relationships with money from the first fact find to the review meetings that follow going beyond the basics about financial goals. Some of the most meaningful advice is likely to come from understanding exactly how people picture spending their retirement or their career development and putting the plans place to enable client’s ambitions.
The Initiative for Financial Wellbeing has put a spotlight on financial wellbeing issues, highlighting their relevance to advisers. I expect this is only set to accelerate as advisers feel the benefit of building relationships with clients by embracing both mindset and money in their approach.
