Financial advice not only pays for itself, but boosts confidence and preparedness for retirement
Today, we launched our new report “Peace of mind: Understanding the non-financial value of financial advice”, which has been supported by St James’s Place Wealth Management.
The report finds that beyond yielding significant financial returns, financial advice also boosts confidence and preparedness for retirement, but that too few people are accessing advice:
- People who take financial advice are, on average, £47,000 better off in retirement than people who don’t – and this is especially true for less affluent groups.
- People who receive advice are also more confident, worry less and are better prepared for retirement than those who don’t take advice.
- However, a significant advice gap remains, with less than 1 in 6 people in the UK currently taking advice.
With changes in pensions and financial service regulations over the past years placing increasing responsibility on individuals to plan for their own retirement income, we argue that professional financial advice has never been more important.
Building on previous research, which found that taking advice leads to an average increase in retirement income of £47,000, our new qualitative analysis finds that financial advice moreover significantly improves financial literacy, boosts confidence, gives people greater control of their finances, offers greater reassurance, and provides greater peace of mind and security.
However, despite the far-reaching benefits of financial advice for people of all income levels, there remains to be a significant advice gap in the UK, with less than 1 in 6 people taking advice and particularly low uptake rates for women. Key barriers identified in the report are a lack of awareness of what advice is (and is not) and a lack of knowledge of where to find an adviser.
We are calling on Government, industry and the regulator to work together to extend the take-up of advice and ensure an extra five million people understand enough to plan for later life by 2030 by:
- Highlighting both the non-financial as well as the financial benefits of advice
- Reassuring individuals, through marketing and policy interventions, that the advice which they will receive is designed for their specific needs
- Increasing the supply and efficiency of advice with the support of technology and through better recruitment and training opportunities.
Arunima Himawan, Research Fellow, ILC argued:
“In a time where so much responsibility is put on us as individuals to plan for an uncertain future, financial advice has never been more important.”
“It’s much too easy to put financial planning off, and even more so when we’re overwhelmed with the day-to-day, we’re worried whether we will make do today, or we simply don’t know where to start. So having someone who can guide us along the way and can point us in the right direction is crucial. It’s not just about maximising retirement income, but about making a plan, feeling in control and having peace of mind.”
“But despite the many benefits of advice, far too few people gain access to the support they need to maximise their financial and mental wellbeing. This is not a new challenge and there are no easy solutions. We have been talking about the advice gap for well over a decade.”
“To achieve real change, we urgently need to see collaboration across industry and Government to better communicate the financial and non-financial benefits of advice, to explore ways of reaching a more diverse customer base and to increase the supply and efficiency of advice.”
Nigel Waterson, ILC Trustee and former MP commented:
“It is undeniable that many people who would benefit in so many ways from advice simply do not access it. Government, industry and the regulator have a big role to play to help more people get in the “front door” to receive the advice they need.”
Andrew Croft, Chief Executive, St. James’s Place Wealth Management argued:
“People today face greater responsibility than ever before when it comes to planning their own financial future, which can be both a complex and daunting task. Good financial advice can therefore make a real difference and putting a clear plan in place as early as possible will help them meet their individual objectives and goals.”
“This report from the ILC shows that working with an adviser you trust is the best step towards gaining control of your financial future and finding peace of mind. It is clear that advice has an important role to play in improving financial wellbeing and resilience across the nation, particularly at uncertain times like this.”
Interviewee, Male/55-74/Lower wealth/Advised:
“Financial advice has made me a lot more confident. It’s more security, and peace of mind, and knowing that, for current situations and the future as well, I’ve sat down and I have made goals.”