It pays to heed financial advice
Isn't it nice to know you're appreciated?
It's even nicer when it's possible to put an exact value on the service you offer.
Well, a leading London ‘think tank' which monitors all things financial has produced a new report which shows that clients who take financial advice are worth up to £41,099 more in assets and pension wealth, compared to those who took no advice.
The think tank is the International Longevity Centre, more elegantly known as ILC-UK, and the report was done in collaboration with the insurer Royal London, using data from the Office for National Statistics' ‘Wealth and Assets' survey. It focused on consumers between 2001 and 2007 identifying those who took advice, or did not, and then looked at financial outcomes for both groups in 2012 to 2014.
Even for less wealthy customers, ILC found that advised clients had on average £14,036 more in liquid assets, and £25,859 more in their pensions. Good advice, if you can get it!
Let's look at the various benefits identified by ILC, above and beyond the £41,099 figure quoted above.
Those who took advice between 2001-2007 were found to have an increase of £773 in pension income.
The data underlying the report was comprehensive: there were 20,000 household interviews carried out in preparation for the report.
While the report clearly shows the value of advice, the message does not seem to have percolated through to the majority of consumers. It was found that only 40.8 per cent of people sought advice between 2012 and 2014, and that most people tend not to go looking for it.
This level of ‘advice inertia' has prompted a debate over how best to persuade consumers to seek help in financial planning and in particular retirement planning.
In last week's column we detailed how the Financial Conduct Authority has expressed alarm that, by their calculations, nearly a third of financial decisions in the specific area of accessing our pensions are taken without advice.
Now the former Minister for State in the Department of Work and Pensions (DWP), Baroness Ros Altmann, has pointed out that customers must be aware of the difference between proper, qualified “advice” and “guidance” in financial planning.
In the context of financial services, "advice" is a service that recommends a specific course of action based on consumers' individual circumstances and goals, and may only be provided by a regulated person or firm.
“Guidance” provides information to help narrow down a consumer's choice, but without making a specific recommendation. It can be provided by a range of individuals, some of whom will be regulated, but some may not.
Her comments referred to the Financial Guidance and Claims Bill, which will pave the way for merging the three existing agencies the Money Advice Service, Pension Wise and The Pensions Advisory Service, into a single guidance body.
Baroness Altmann conceded that, even within the DWP, there is what she called “immense confusion” as to the difference between full advice and a guidance service.
The sure way to know that you are getting the best quality help with your financial planning is to find a qualified, independent financial adviser, who can get you on track to maximise your financial wellbeing.
Michael Kennedy is an independent financial adviser and pensions specialist, and can be contacted on 028 7188 6005. For further information go to ‘Kennedy Independent Financial Advice Ltd' on Facebook.