Your IndustryAug 2 2017

is our service worth FA?

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A question I am regularly asked is: what is the point of a financial adviser? Some advisers may be appalled to read this, but it is a common question before consumers consider consulting one. 

If consumers cannot see the point or value of a financial adviser, they will never use their services. To be fair, there really is no point in anyone seeing a financial adviser unless that adviser can, with at least some confidence, provide evidence that the consumer will be materially better off as a result.

Financial advisers understand implicitly the value of the advice they offer to clients

I was reminded of this question recently with the publication of The Value of Financial Advice report from the International Longevity Centre (ILC-UK), supported by Royal London. ILC-UK looked at detailed survey data covering 5,000 people over a near 20-year period and tried to answer this question. 

Financial advisers, I am sure, understand implicitly the value of the advice they offer to clients. It goes to the core of what they do.

They do, after all, offer many roles. They can be problem solvers, financial crisis management consultants, later life inheritance tax advisers, young family protection helpers and perhaps even a shoulder to cry on – at least financially – during a messy divorce.

Some clients require all of these roles at various times and while these are all valuable roles, the client also needs to see the financial value of the advice they are receiving and why they should pay the adviser’s fees.

Some material benefit must be received. Whether that be a problem solved or a financial crisis is immaterial; the value of the advice must be clear, otherwise there was no point in seeing the adviser.

Many advisers struggle to demonstrate the benefits of their advice clearly, but the strength of the ILC-UK report is in its detailed analysis of the true value, on average, of financial advice.

By comparing the long-term financial performance of advised and non-advised consumers it found:

• "Affluent but advised" clients amassed on average £12,363 (or 17 per cent) more in liquid financial assets than the affluent and non-advised group, and £30,882 (or 16 per cent) more in pension wealth.

• The "just getting by but advised" accumulated on average £14,036 (or 39 per cent) more in liquid financial assets than the "just getting by but non-advised" group, and £25,859 (or 21 per cent) more in pension wealth.

The report also found that financial advice led to greater levels of saving and investment in the equity market:

• The "affluent but advised" group was 6.7 per cent more likely to save and 9.7 per cent more likely to invest in the equity market than the equivalent non-advised group.