Savers who took advice in the early 2000s are on average £47,000 better off a decade later than those who chose to go it alone, according to research.
Research from Royal London and the International Longevity Centre, published today (November 28), found savers who received financial advice between 2001 and 2006 were able to boost their pension wealth by £31,000, while also experiencing a £16,000 uplift in other areas of financial wealth, as measured in the two-year period 2014-2016.
The research found the impact of advice was greater for those of more modest means than for those who fell into the affluent category.
The uplift for the affluent was 24 per cent in financial wealth (eg shares, Isas, bank accounts), whereas it was 35 per cent for the non-affluent group.
On pension wealth, the uplift was 11 per cent for the affluent compared with 24 per cent for the non-affluent.
Advice also increases the likelihood of having savings by 4.1 percentage points and the probability of having risky assets by 7.5 percentage points, the analysis, which polled 4,100 savers, found.
The latest research was a follow up to analysis carried out in 2017 which also looked at the value of financial advice in the lead up to the years 2012-2014.
It found the benefits of advice for occupational pension income increased from £799 in the previous analysis to £1,155 in the latest one.
Source: Royal London/ILC
The research also found the pension pots of those who took ongoing advice were on average 50 per cent larger than of those who had only taken advice once at the beginning.
Sir Steve Webb, former pensions minister and director of policy at 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.”
Royal London has called on the industry and policymakers to work together to get more people to see the value of advice and the impact it can have on their retirement income.
In particular it wants to ensure that advisers communicate clearly about the costs and benefits of advice as well as develop technology so that advice can be delivered at a lower cost.
It has also called on the industry to ensure that those who do not receive advice can still achieve good outcomes in retirement.
International Longevity Centre director David Sinclair said: “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.”
Alan Chan, director and chartered financial planner at IFS Wealth & Pensions, said: "The research debunks the myth that financial advice and planning is reserved for the affluent only. It’s clear that it’s ordinary individuals who typically receive the greatest value when working with a financial adviser or planner."
He added: "There are other instances where an adviser can add value but is often overlooked in this kind of research as it is difficult to quantify. Equally as important as advising clients what they should do is advising clients against doing something that is not in their best interests.
"For example, not to withdraw money from a pension and incur taxes if there are alternatives to explore first, not to invest money in unregulated investments which have no FSCS protection and/or linked to scam, and looking at protecting their family and lifestyle with the right insurance plans."
amy.austin@ft.com
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