PEOPLE who receive professional financial advice will be £47,000 better off than those who don’t in a decade’s time, new research has found.
A study from pensions firm Royal London and the International Longevity Centre, a think tank, found that investors who opted to take financial advice between 2001 and 2006 saw an average increase in of £47,706 on average by 2014/16, compared to those who decided to go it alone.
The research came from analysis of the government’s Wealth and Assets Survey, which has tracked the wealth of thousands of people. The increase in wealth comprises an extra £31,000 of pension wealth and £16,000 in non-pension financial wealth.
The joint study also found that the proportionate impact of taking advice is greater for less affluent people.
Less well-off investors saw a 35 per cent rise in financial wealth such as shares, ISAs and bank accounts over the period, compared to more affluent investors who saw a 24 per cent uplift.
On pension wealth, the increase was 24 per cent for the non-affluent group and 11 per cent for the better-off investors.
The researchers suggested that the results showed that those who take advice are more likely to invest in assets which offer greater returns with greater risk.
Read more: P2PFN‘s special report on financial advisers
“Many of those who receive financial advice can testify to its value but it has always been difficult to quantify,” said Steve Webb, former pensions minister and director of policy at Royal London.
“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.”
David Sinclair, director at the International Longevity Centre, agreed 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,” he added. “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.”