A recent report by the International Longevity Centre UK (ILC) (read in full here) concluded that people who worked with a professional financial adviser were a very impressive £47,706 better off over a 10 year period. This value was made up of an increase in overall asset values including accumulated pension wealth.
Yes, the above figure is an average and includes affluent people and ‘just getting by’ people and clearly the affluent benefited the most overall. However, even those just getting by improved their overall wealth position by £26,712 by taking professional financial advice. Just think about that for a moment, we all understand that money goes to money but for a ‘just getting by’ client to increase their wealth by £26,000 over a 10 year period is a big thing in my book. Especially when you stop and think about the fact that the additional wealth will compound and grow over the next 10 years.
Having spent the majority of my 25-year advisory career as an independent professional financial adviser (IFA) I would have expected the majority of this increase to come from exposure to an IFA. Nope, it makes little difference. The important factor is financial advice not whether the product selection is ‘whole of market’ or restricted. Given that many IFAs will use expensive actively managed investments (and probably believe, incorrectly, that they benefit from superior investment selection skills) I maybe should not be too surprised with this result. Further evidence supports the need for an ongoing relationship with a financial adviser as opposed to receiving one-off advice. For those who continued to receive financial advice during the 10 year period, they were over 50% better off than those who did not. Using the figures above this suggests that over £23,000 of the £47,706 increase was attributable to an ongoing relationship.
I take two things away from this blog, firstly, financial advisers of all denominations need to shout from the rooftops about the value they add; secondly, they will really need to find a way to engage with the ‘just getting by’ cohort because this is a far larger segment!
More to follow…
Tony Slimmings – MD