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Taking advice delivers £47k more over 10 years

3 December 2019

People who took financial advice were found to be £47,000 better off after a decade than those who tried to go it alone, new research from Royal London and the International Longevity Centre has revealed.

According to the research What it’s worth: Revisiting the value of financial advice, receiving professional advice between 2001 and 2006 resulted in a boost to wealth of £47,706 in 2014/16.

The findings come from detailed analysis of the government’s Wealth and Assets Survey which has tracked the wealth of thousands of people over two yearly waves since 2004-06. It showed an extra £31,000 of pension wealth and over £16,000 extra in non-pension financial wealth.

The benefit of advice was greater among those with more modest assets, Royal London said, with those identified as “affluent” receiving an extra 24% uplift in financial wealth, compared with 35% for the “non affluent” group. On pension wealth, the uplift was 11% for affluent clients and more than double (24%) for the non-affluent.

Royal London said the improved outcomes for those who take advice was likely to be as a result of investing in assets which offer greater returns but with greater risk. Across the entire group, the impact of taking advice was found to add around 8% to the probability of investing in equities.

Interestingly, the research also showed that those who continued to take advice at the end of the assessed period had pension pots around 50% higher than those who had only taken advice at the beginning of the period.

Steve Webb, director of policy, Royal London, said: “Many of those who receive financial advice can testify to its value but it has always been difficult to quantify.  This research uses the latest statistical methods to identify a pure ‘advice effect’ and it is strikingly large.

“If financial advice can add £40,000 to your wealth over a decade compared with not taking advice, it is incumbent on government, regulators, providers and the advice profession to work together to make sure that more people are sharing in this uplift.”

International Longevity Centre director, David Sinclair, added: “The simple fact is that those who take advice are likely to be richer in retirement.  But it is still the case that far too many people who take out investments and pensions do not use financial advice. And only a minority of the population has seen a financial adviser. We must now work together to get more people through the ‘front door’ of advice.”

The report urges the industry and policymakers to work together to help advisers clearly communicate the costs and benefits of advice, harness technology to deliver quality advice at a lower cost and ensure those who do not receive professional advice still achieve good outcomes.

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