Putting a number on the value of advice

27 January 2020



We recently worked with the International Longevity Centre to put a number on how much financial advice is worth to those who receive it. Here, Tom Dunbar elaborates on the findings of that research.

There are many myths and misconceptions around financial advice -some say it is only for high net worth people while others believe the fees are too high.  In recent years we have worked with the International Longevity Centre –UK (ILC-UK) to expose these myths and quantify the value of financial advice.

In What it's worth - Revisiting the value of financial advice data was analysed from the ONS’s Wealth and Assets survey which has tracked the wealth of thousands of people over two yearly “waves” since 2004-06 – we are currently on Wave 5. Through this we’ve been able to look at the financial outcomes of those who received advice and those who did not. Outcomes considered included the amount of accumulated pension wealth as well as net financial wealth – this includes current accounts, ISAs, life insurance products, shares etc. The probability of owning equity assets was also considered.

The results were startling with those who took financial advice being on average £47,706 better off than those who didn’t. This is split between a £30,991 boost in pension wealth and an increase of £16,715 in other financial assets.

Affluent vs. just getting by

One of the most important findings of the research was the proportionate impact financial advice can have on people with more modest means. The sample was split into two groups –the “affluent” and the “just getting by” with the “just getting by” group benefiting from a 35% uplift in their financial wealth (shares, ISAs etc.) compared to 24% for the “affluent” group. When it comes to pension wealth the “just getting by” group benefited from a 24% uplift in comparison to 11% for the “affluent” group.

A key reason why we see these improved outcomes is that those people taking advice are more likely to invest in assets with the potential to deliver more return - albeit with more risk. Across the entire sample the impact of taking advice is to add around eight percentage points to the probability of investing in equities.

Ongoing financial advice

The research also highlights the impact of taking advice on an ongoing basis. According to the analysis those who reported taking advice at both Wave 1 and Wave 5 demonstrated almost 50% higher pension wealth than those who only reported receiving advice in one of the waves.

So far from being something only to be enjoyed by high net worth people this research powerfully demonstrates the enormous impact taking financial advice can have on people from across the income spectrum.

While this research is able to quantify the value of financial advice with regards to the amount accumulated in pensions and other vehicles it is also worth highlighting the other benefits that are perhaps harder to quantify but still have an enormous impact on someone’s long term financial wellbeing. Tax and cashflow planning for instance are areas where advisers can deliver real value to their clients on an ongoing basis.

This article was originally published in Professional Adviser.

About the author

Tom Dunbar

Distribution Director

Tom is responsible for Royal London Intermediary distribution of protection, individual pensions and workplace pensions. He was previously Group Strategy Director at Royal London. Before Royal London, Tom was a Partner at NMG Consulting where he provided strategy advice on where to play and how to compete to insurers, platforms and asset managers in the UK and international markets. Tom holds a first class degree in Chemistry from Oxford.

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The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The firm is on the Financial Services Register, registration number 117672. It provides life assurance and pensions. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London, EC3V 0RL.