How would you like an extra £47,700? Just take financial advice!
WOULD you like to increase your lifetime wealth by nearly £50,000? Well, here we'll show you how!
It’s by taking financial advice. And here’s the best part - ‘ordinary people’ on ordinary incomes have most to gain.
Pensions company Royal London got together with the International Longevity Centre, and put a number on how much financial advice is worth.
In their report “What it's worth - Revisiting the Value of Financial Advice” they found that those who took financial advice were on average £47,706 better off when they retired than those who didn't. This is split between a £30,991 boost in pension wealth, and an increase of £16,715 in other wealth and savings.
The report looked at the amount of accumulated pension wealth, as well as net financial wealth including current accounts, ISAs, life insurance products, and shares.
The report found that those with most to gain from financial advice were those who currently do not have considerable disposable income.
This includes the ‘Jams’, a term which emerged from the recent period of Tory austerity. It describes those at the not-so-well-off end of the social scale – those who are ‘just about managing’.
The sample was split into two groups - the ‘affluent' and the ‘just getting by' - with the ‘just getting by' group benefiting from a 35 per cent uplift in their financial wealth, compared to 24 per cent for the more ‘affluent' group.
When it comes to pension wealth the ‘just getting by' group benefited from a 24 per cent uplift in comparison to 11 per cent 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 a better return.
So why do people on ‘normal’ incomes tend not to think of talking to a financial adviser? There are four reasons.
First, they believe financial advisers are only interested in wealthy clients. Nothing could be further from the truth. Moderate earners and families have many areas where they could benefit from advice, particularly in terms of life and critical illness insurance, savings and pensions.
Second, many people worry that financial advisers will do a ‘hard sell’ and encourage them to buy products they don’t need. Again, those days are gone, and the delivery of advice is well-regulated and designed to ensure that the advice cycle is a sensible, problem-solving process for the customer.
Third, people often worry that they do not know enough about finances to speak to an adviser, they worry that they will ‘come across as stupid’. Again, knowledge of finance and the products is not required – that is, after all, why advisers are there.
Fourth, people worry about the costs involved in paying for advice. As we showed above, these are minimal compared to the potential benefits to be gained, and the first consultation, where we find out how you would best benefit, is not only no-obligation, but completely free of charge.
Another major finding from this report confirms that financial planning is a journey, not a destination. You will benefit most if you review your finances with an adviser every year or two.
Royal London have been monitoring their group of clients for the past 15 years, at two year intervals, and found that those who reviewed throughout that period demonstrated almost 50 per cent higher pension wealth than those who only received advice as a once-off.
:: Michael Kennedy and Shaun Doherty are independent financial advisers and pensions specialists, and can be contacted on 028 71886005. Further information on Facebook at Kennedy Independent Financial Advice or visit www.mkennedyfinancial.com