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Individuals receiving financial advice could see their wealth increase by up to £40,000, an ILC-UK study has found.

The Value of Financial Advice research, supported by Royal London and funded by several government departments, was the largest study of its kind in the UK, with over 90,000 participants. The study looked at the impact of financial advice on two groups of individuals; the ‘Affluent’s,’ and the ‘Just getting by’s.’

Research, which began in 2001, revealed that individuals receiving financial advice saw their wealth grow noticeably by 2012-14, compared to their non-advised counterparts.

The ‘Affluent but advised’ group saw their investments in liquid assets grow on average by 17% (or £12,363), while their pension wealth also grew, by 16% (or £30,882). Meanwhile the ‘Just getting by’ group saw even larger growth, with the value of their investments growing by 39% (or £14,036), while their pension wealth grew by 21% (or £25,859).

The ‘Affluent’ group is made up of wealthier individuals who are also more likely to have degrees, be part of a couple, and be homeowners. The ‘Just getting by’ group is less wealthy, more likely to have lower levels of educational attainment, be single, divorced or widowed and be renting.

 

Advised individuals more likely to save and invest

This pension and investment growth was put down, in part at least, to the fact individuals who had received financial advice were more likely to save and/or invest their wealth, than people who had received no advice at all.

And the benefits of building a long-term plan with a Financial Adviser were felt directly by study participants entering retirement. Advised-individuals received, on average, £773 more in pension income per year than their non-advised counterparts. This was the case at all ages but particularly for the oldest groups (+£1,100 for people aged 65-79 and +£1,300 for those aged 80 and over).

Ben Franklin, Head of Economics of Ageing at 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.”

Only 16.8% of adults living in Britain are receiving financial advice

The ILS-UK study also found that only 16.8% of adults living in Britain, around 7.5 million people, received any financial advice between 2012 and 2014. That’s a worrying stat, even if it is mitigated slightly by the fact that, of the people receiving advice, almost 90% said they were satisfied with the service provided.

Some of those interviewed talked about the problems they face. Jackie, aged 60, said that information on her pension options was

“As clear as mud.”

Jackie had changed employers several times during her career, meaning she had a number of pensions with different providers, but was unable to manage these effectively. She spoke to her pension providers and to The Pensions Advisory Service to better understand what she had in her pension pot, but this didn’t help.

“The Government has given people choice, in terms of retirement options, but then expect them to make decisions, when my expectation was that the pension would be managed and sorted. People do not know what to do.”

 

Let us help

We know this can all seem confusing and complex. But it doesn’t have to be.

At Magus, we believe that financial planning is essential for all our clients. We want to help remove the confusion, so that you can build a financial plan that works for you now, and in the future. We want you to imagine what it would be like to achieve your financial goals, allowing you to turn your personal dreams and aspirations into reality.

If you’d like a talk through any aspect of your financial life, get in touch with us – we’d be delighted to hear from you.

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