Is Financial Advice Worth It?
When considering if financial advice is worth it, it’s important to consider why people get financial advice in the first place. The most common requests our Financial Advisers deal with are the need for:
- Pensions advice
Helping clients get organised and put a retirement plan in place.
- Investment advice
Helping clients maximise the use of their allowances and ensure they are invested in suitable products for their risk profile.
- Tax advice
Helping clients plan their financial legacy and mitigate any unnecessary tax bills.
- Financial planning
Create a long term financial road map to ensure they are on track to achieve their financial goals.
These are areas where you need to have a certain level of expertise to understand how the market works. You’ll also need to work out the best way to take advantage of the various tax regimes to improve your chances of making the most of your investment.
The value of pensions and investments and the income they produce can fall as well as rise. You may get back less than you invested.
Tax treatment varies according to individual circumstances and is subject to change.
Very helpful, advice was clear and there was not pressure at any stage to commit to purchasing a policy. Also the advice was tailored to my budget.
Why Get Financial Advice?
We go into more detail about the statistics behind the value of advice below, but headline figures indicate…
- According to joint research from Royal London and the International Longevity Centre, individuals who take advice on their investments can end up almost 40% better off in terms of liquid assets compared to those who receive no advice.
- The same study puts the value of advice in terms of real financial assets and pension wealth at £41,099 in additional wealth per person and, when it comes to pensions, households which received advice ended up between 16% and 21% better off than those which didn’t.
- According to Unbiased, on a cost/benefit analysis the benefit of advice on pension contributions outweighed the cost by almost 6,000%.
- Research from FTSE 100 financial services giant Old Mutual has found individuals who received pensions advice and set clear retirement goals were expected to enjoy a retirement income more than 50% greater than those who received no advice at all.
- US investments giant The Vanguard Group has found clients benefit from a maximum additional 3% of net returns per annum on their portfolios when they take advice from advisers following Vanguards advice framework.
- The Investment Funds Institute of Canada has found that the value of advice is compounded over time, with advised households having a net worth 2.73 times greater than non-advised households after 15 years.
- 93% of financial advice given in 2015 was suitable for clients according to the FCA, which says “the role of the financial adviser is today more important than ever“.
How Getting Advice Could Increase Your Wealth…
Numerous studies have found that individuals who take regular financial advice over the course of their adult lives end up substantially better off than those who don’t.
Research by the Financial Conduct Authority, our industry regulator*, assessed the value of financial advice in November 2017 and the results were strongly in favour of financial advice being worth it for consumers.
“I don’t think there’s any doubt that the role of the financial adviser is today more important than ever.”
FCA Director of Supervision for Investment, Wholesale and Specialists
Looking back across 2015, the FCA found than in excess of 93% of advice given that year was suitable for clients across the board, calling this “a significant endorsement of the standard of UK financial advice“.
How Much Value Financial Advice Could Add…
All the way back in 2013, a US study by Morningstar indicated that when you followed Morningstar’s framework…
Financial planning advice can add almost a third to the value of retirement wealth.
Around the same time, The Investment Funds Institute of Canada released a study which showed that the value of advice in terms of the net wealth of households increased notably over time.
More recently, the US investment giant The Vanguard Group – which had $4.5 trillion in global assets under management as of September 2017 – found that…
The value of an adviser following Vanguard’s framework can add around an average of 3% of net returns per annum to a client’s portfolio.
Meanwhile, joint research from Royal London and the International Longevity Centre (ILC) has found that…
Individuals can be almost 40% better off in terms of liquid assets when it comes to investing via an adviser compared with those who receive no advice.
In the 6 years between 2001 and 2007, the study found that…
Receiving advice resulted in approximately £13,435 in additional accumulated assets per household, with liquid assets rising by between 17% and 39% depending on the demographic makeup of the household.
As for pension assets, ILC and Royal London found that advised individuals were approximately £27,664 better off in terms of additional pension wealth accumulated than those who received no advice at all. Households were between 16% and 21% better off, depending on the demographic makeup of that household to start with.
“The results from our analysis suggest that receiving financial advice… leads to higher accumulation of both financial and pension wealth.
If we add up financial assets and pension wealth, we can quantify the value of advice at approximately £41,099 in additional wealth per person for all the advised over a period of 5-13 years. In percentage terms that means that the advised have accumulated around 20% more financial and pension assets than the non-advised.”
The Value of Financial Advice
Royal London and the International Longevity Centre
Overall Impact of Advice on Wealth
Unbiased, the UK’s largest online database of financial advisers, released research in September 2015 which found the benefit of advice outweighed the cost (as worked out by the average paid in 2015) over a lifetime by almost 6,000%.
According to Unbiased, the average cost of advice on a £200 monthly pension contribution was £580, but over time this would result in significant benefit of an additional £34,300 in a pension pot for a 25-year old (excluding tax relief and interest). This is a return on the initial cost of advice of 5,813%.
Could You Increase Your Retirement Income by More Than 50%?
Consider the 2015 publication by FTSE 100 financial services and insurance group Old Mutual, which is laid out in the graphic below. Redefining Retirement contained a survey comparing those who took regular financial advice and those who didn’t.
For those who didn’t take regular advice, expected retirement income was £18,138 per year. For those who did take advice and had a clear goal to aim for, expected retirement income increased to £27,736 – an increase of more than 50%.
The Impact of Goals Combined With Financial Advice
Whether your goal is a specific retirement income you’re aiming for or you’re looking to grow an investment pot with a view to purchase a home, marking it out in a defined way from the start is essential.
We are here to listen to your goals and needs and work with you to plan financially for that future, so give us a call today on 02084327333.
Pensions & Investments Expert at Drewberry
How Can a Financial Advisor Help?
How are your investments doing? Do you have:
- A clear idea of where your investments are?
- Knowledge of which asset classes you’re invested in?
- A sufficient understanding of how to properly diversify a portfolio across different asset classes, regions or investment styles?
- A full understanding of fees and charges you’re paying on your pensions and investments?
- An idea of whether your risk profile is aligned with your current appetite for risk and stage of life?
- A clear financial goal for your pensions/investments?
If you answered no to any of these questions, that’s where the value of financial advice kicks in.
We’ll put together a financial plan so we have some clear goals to work with and ensure we help you stay on the right track to achieve your financial goals.
Jonathan Cooper DipPFS
Paraplanner at Drewberry
How Can Financial Advice Help You?
It can mean having a plan in place to achieve life goals in retirement, from paying for your daughter’s dream wedding to going round the world on the holiday of a lifetime. While this of course comes with a price tag in monetary terms, to many of our clients being able to meet these goals is truly priceless.
Providing financial advice for pensions and investments isn’t just about giving your situation a once-over. We help clients over the long-term, from starting a pension to drawing on that pot in retirement. We’re here to help with all aspects of your financial life, no matter what your goals and desires might be.
For instance, do you want to…
- Grow a deposit to buy your first home?
- Retire early?
- Start saving for children’s school fees?
- Visit dream destinations in retirement?
- Be able to help children and grandchildren onto the housing ladder?
- Have cash at hand to buy a place in the sun for your later years?
- Take up new sports and hobbies after retirement?
Many of us would answer yes to at least some of these questions, but can you achieve this in a way that balances your retirement needs with these goals? Otherwise, how would you ensure you can not only meet these aspirations but also have enough to live on after you finish work?
Why expert Financial Advice was worth it for this Lawyer…
Steven Lewis initially contacted Drewberry for Income Protection Insurance as he was self-employed at the time. However, he was also considering getting his pensions in order to save for a better retirement, having little idea of where he was with his pension provisions.
After a lot of digging by Drewberry pensions expert Neil Adams, we unearthed no fewer than seven separate pension pots for Steven – followed a little later by an eighth turning up from Standard Life. With Neil’s help, Steven consolidated his pension arrangements into fewer, easier-to-manage pots and now feels back on top of his retirement savings.
Getting Steven’s retirement provisions in order…
It turns out the situation wasn’t nearly as bad as I’d thought. Initially, we found seven different pension schemes that I’d contributed to over the years! I think there are a lot of people like me out there – hard-working people who are well organised in their professional lives but who, for one reason or another, never really got to grips with all their pensions.
For me, my pension was the final piece of the jigsaw I needed to sort out and Drewberry were there to help me do it.
With his pensions consolidated and a concrete financial plan in place, Steven now has clear goals in mind for his finances and is on track to retire earlier than he thought he’d ever be able to.
Our Client Stories
5 Reasons Why Financial Advice Can Be Worth It
1. You’re not a financial expert
You wouldn’t drill your own teeth or install your own plumbing, so why try to plan your own retirement? The pensions and tax regimes in the UK are notoriously complex and subject to frequent change. Most people simply don’t have the knowledge or simply the time to stay abreast of such changes and ensure these regimes are working for them.
2. Over time, good financial advice has been shown to add real value
As seen from the research above, financial advice – and the setting of clear financial goals – has been shown to aid significantly in boosting the value of your pensions and investments portfolios.
3. Financial advice is typically tax-deductible for the self-employed
If you’re the director of a small company, the fees for the advice you receive on how to start a pension through your company and ensure directors and employees are remunerated tax-efficiently is typically a deductible business expense.
4. Greater choice and flexibility
Some professional advisers usually have access to a broader range of products and services than investors who choose to shop directly. Many also enjoy preferential terms from key product providers and are able to pass these along to their clients.
5. Regular reporting on and rebalancing of your portfolio
At Drewberry, we regularly sit down with clients to talk them through their current holdings and where they are at the moment. This provides the opportunity to stay on top of your portfolio, know where it’s invested and how far along you are towards meeting your goals. Advisers will also rebalance your portfolio, regularly reexamining the risks you’re taking to make sure it’s right for you.
Getting Expert Financial Advice…
You could spend hours trying to analyse funds and investments and coming up with a retirement plan yourself, or you could free up that time to spend with your loved ones by paying a professional to do the hard work for you.
If you’re wondering if financial advice is worth it, contact us on 02084327333 to find out how we may be able to help you.
Director at Drewberry
Drewberry has professional financial advisers on the team and we help clients across the country. Whether you need help implementing an investment strategy or advice on when you should retire, we’re here for you. For a full list of ways we can help and to discuss how financial advice could benefit you, don’t hesitate to get in touch.
78 Cannon Street
125-135 Preston Road