The International Longevity Centre UK has called on the Government, industry and the regulator to work together to close the advice gap, after research showed that less than 1 in 6 people seek financial advice and those who sought advice were better off in later life.
A new report from ILC, carried out in partnership with St James’s Place, wants to ensure an extra five million people understand enough to plan for later life by 2030.
The report found that people who take financial advice are, on average, £47,000 better off in retirement than people who don’t, particularly among less affluent groups. In tandem, those who receive advice were shown to be more confident, worry less and feel better prepared for retirement.
Despite this, ILC warned that there remains a significant advice gap in the UK, particularly among women. Key barriers cited by the report include a lack of awareness of what advice is and a lack of knowledge of where to find an adviser.
ILC has called for more to be done to highlight both the non-financial and financial benefits of advice and increase the supply and efficiency of advice through technology and better recruitment and training opportunities. It has also called for individuals to be reassured through marketing and policy interventions that advice will be tailored to their specific needs.
Arunima Himawan, research fellow, ILC, says: “In a time where so much responsibility is put on us as individuals to plan for an uncertain future, financial advice has never been more important.
“It’s much too easy to put financial planning off, and even more so when we’re overwhelmed with the day-to-day, we’re worried whether we will make do today, or we simply don’t know where to start. So having someone who can guide us along the way and can point us in the right direction is crucial. It’s not just about maximising retirement income, but about making a plan, feeling in control and having peace of mind.
“To achieve real change, we urgently need to see collaboration across industry and Government to better communicate the financial and non-financial benefits of advice, to explore ways of reaching a more diverse customer base and to increase the supply and efficiency of advice.”
Andrew Croft, chief executive, St. James’s Place wealth management, added: “People today face greater responsibility than ever before when it comes to planning their own financial future, which can be both a complex and daunting task. Good financial advice can therefore make a real difference and putting a clear plan in place as early as possible will help them meet their individual objectives and goals.
“This report from the ILC shows that working with an adviser you trust is the best step towards gaining control of your financial future and finding peace of mind. It is clear that advice has an important role to play in improving financial wellbeing and resilience across the nation, particularly at uncertain times like this.”
Commenting on the report, Aegon pensions director Steven Cameron said the pension provider welcomed the report’s emphasis on the non-financial benefits of financial advice.
“Advice can be an important factor in helping people improve their financial wellbeing which is the link between money and happiness. Financial wellbeing isn’t just about the amount of money someone has now, it’s about understanding future goals and having plans in place to achieve them. Financial advice puts people much more in control of their long-term financial plans and their relationship with money, creating a far more positive outlook. So, for those wanting to focus less on money worries and more on enjoyment in life, financial advice could help give them the peace of mind to do so.”
According to Aegon’s own research, people who had taken advice were more likely to enjoy life because of the way they are managing their money (34%) compared to those who haven’t (25%). Similarly, those who have had financial advice are also more likely to agree that they are doing everything to secure their financial future (49%) compared to just 37% of those who haven’t.