As you prepare for a well-earned summer break, I urge you to reflect upon some detailed research by ILC-UK into the value of financial advice, which has revealed that even those consumers who are just getting by can be more than £40,000 better off if they receive advice.
This is fantastic news, as it demonstrates the real benefit clients gain from financial advice. It is likely that this significant increase in the value of the average client’s savings also includes the cost of advice as, during the research period, 2001 to 2007, advice was most likely commission based.
In reality, this important research, which was sponsored by Royal London, dramatically understates the actual long-term benefit of financial advice as it focussed on advice given between 2001 and 2007 and the benefit gained by 2012 to 2014. The potential gain over the client’s working life is therefore many times greater than the £40,000 highlighted in the report. My back-of-the-envelope calculation of the potential benefit of financial advice over a working lifetime is at least £120,000 which, with compound interest, is likely to be the order of £250,000.
Looking at these numbers, it is not hard to see why the opening sentence of the report states that: “This report demonstrates the very real value of financial advice to the consumer” then adds that, using robust statistical methods, the results show: “…those who take advice are likely to accumulate more financial and pension wealth, supported by increased savings and investing in equity assets, while those in retirement are likely to have more income, particularly at older ages.” The clarity and importance of this message, coupled with the statistically robust research on which it is based, seems to me to make this report essential reading for the policy makers and regulators as well as advisers.
I urge Royal London to send a copy to every MP, as well as the FCA board, and urge them to reflect on its important message about the value of financial advice while they relax by the pool. They will then return to their desks refreshed and well positioned to focus on increasing every consumer’s access to good quality financial advice. This will benefit both consumers and the government because, as this report clearly demonstrates, everyone wins from sound financial advice.
Ken Davy is chairman of SimplyBiz Group