Readers of Money Marketing will not need much convincing that paying for advice is one of the best investments a person can make.
But how can you convince a sceptical public quite happy to pay solicitors or accountants but somehow reluctant to do the same when it comes to their personal finances?
A recent piece of research by the International Longevity Centre and sponsored by Royal London seeks to help with that dilemma. For the first time, it tries to put a figure on the value of advice.
It uses data on thousands of people from the Office for National Statistics’ wealth and assets survey who were tracked over time. The research considers those who report they received advice in the period 2001-2007 and then looks at their data for 2012-2014 to see how their financial wealth and pensions wealth has performed.
Crucially, it controls for the fact certain groups are more likely to take advice than others.
The headline findings are dramatic. Overall, those who took advice in the earlier period are over £40,000 wealthier by 2012-14 than those who did not, other things being equal. This breaks down as around £13,000 extra in financial assets and over £27,000 more in pension wealth.
Interestingly, the proportionate uplift from taking advice is bigger for those of more modest means. While the “affluent but advised” group had an extra 17 per cent in financial assets compared with their affluent but unadvised counterparts, the “just getting by” group saw advice boost their financial assets by 39 per cent.
One of the reasons for this was those who took advice were much more likely to invest in equities. Given the surge in money going into cash Isas paying negative real interest rates, this issue certainly needs to be addressed.
What is encouraging is the impact of advice was felt relatively quickly: the advice was taken in the early 2000s and the effect was seen within a decade. If we could just establish a norm that people take a financial health check at 50, this could significantly boost people’s wealth at retirement.
What is also important, of course, is that people take advice about their at-retirement choices, as well as on an ongoing basis throughout retirement. As the recent FCA report on retirement outcomes showed, those who take advice are likely to achieve better outcomes into retirement over and above having more to invest in the first place.
The research also found the vast majority of people who took advice reported high levels of satisfaction. That said, the challenge is to get people through the door of advice firms. Hopefully these independent findings will help to persuade more people that taking high quality, impartial advice at the right time is the key to a secure financial future.
Steve Webb is director of policy at Royal London