The Value Of Financial Advice: How It Helps Wealth Grow

Measuring the impact of financial advice can be difficult. However, research and our own experience highlight that it can have a positive impact.

The value of financial advice is something we talk about a lot at Beaufort Financial. We see the benefits it brings clients on a regular basis, whether that’s the confidence to forge ahead with retirement plans or understand what they’ll leave behind for loved ones.

However, measuring the impact into ways our clients can easily grasp can be complex.

After all, whilst we might help their wealth grow or minimise tax, it’s difficult to show what impact this has over the long term. In some cases, clients may even wonder if they’d have achieved the same results without the use of a financial planner.

Measuring The Financial Gains Of Advice

Research from the International Longevity Centre has highlighted how taking financial advice can help wealth grow at a faster pace.

The latest report – What it’s worth: Revisiting the value of financial advice – looked at the value of taking financial advice on overall financial outcomes over an extended period of time.

The research found that individuals that received financial advice between 2001 and 2006 benefitted from a total boost to pensions and financial assets of £47,706 in 2016/16 on average. This was split into:

  • £30,991 in pension wealth
  • £16,715 in financial assets

Interestingly, the research highlights the difference among those that did receive advice.

Those defined as ‘just getting by’ actually have a greater potential to benefit than those considered ‘affluent’. The former saw a 24% boost in pension wealth compared to the 11% increase among those termed ‘affluent’. Those that are ‘affluent’ are more likely to seek advice, but the report highlights it can be beneficial to those that would typically take a DIY approach. In contrast, ‘affluent’ individuals were more likely to benefit from growth in financial assets, though the gap was smaller.

Commenting on the findings, Steve Webb, 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. The research uses the latest statistical methods to identify a pre ‘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, regulatory, providers and the advice profession to work together to make sure that more people are sharing in this uplift.

One-off vs Ongoing Advice

There are points in life where one-off financial advice can be useful, typically coinciding with big life events. This could be as clients approach retirement, a relationship breaks down, or they start to plan for the next generation’s future.

Yet, the report highlights that ongoing financial advice delivers further benefits. It found that building an ongoing relationship with a financial adviser could help grow wealth even further. Those that regularly took professional financial advice had nearly 50% higher average pension wealth than those that only received one-off advice.

Ongoing financial advice gives individuals a chance to review their financial plans and ensure they remain on track. Even smaller life changes, such as a pay rise, may change the best way to make use of money with long-term goals in mind. Regular meetings with a financial planner can help ensure these are taken into consideration.

David Sinclair, Director of the International Longevity Centre, 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.

The Non-Financial Benefit Of Advice: Confidence

The report clearly highlights the financial benefits of working with a financial planner. However, the true impact of financial advice goes beyond simply how much money you have in the bank or your pension.

One of the key areas where financial advice really benefits people is the confidence it gives them.

Clients often seek out financial advice because they’re worried about the future. They may be concerned about their retirement position, what would happen if the unexpected were to occur or how they can improve the financial security of the next generation.

We often find that, with some careful planning, clients already have the means to achieve their goals and aspirations. What clients need is the technical knowledge of financial planners to make their savings, investments or other assets work for them, and the confidence it delivers.

Our goal is to ensure each Beaufort Financial client has the confidence to make lifestyle decisions, safe in the knowledge that their finances are in order with their plans in mind. These lifestyle decisions could include:

  • Retiring from work five years early
  • Dipping into savings to help children or grandchildren get on the property ladder
  • Make big-ticket purchases to achieve dreams, such as travelling the world

Whilst increasing wealth is part of what we do, the true impact of financial planning can change lives and we hope to give people the confidence to pursue their dreams.

If you’d like to discuss how we can work together, please get in touch with us.