Although the cost of financial advice can seem steep, according to research conducted by life, pensions and investment company Royal London and the International Longevity Centre, in the space of just 10 years, customers who had sought financial advice were, on average, £47k better off than those who chose to go it alone.
Those who fostered an ongoing relationship with their adviser were up to 50% better off than those who had only received advice once. Interestingly, the analysis showed that the financial benefits of advice for those of modest means were greater than for those customers who were considered to be affluent. Over the 10 year period, the ‘just getting by’ group who took advice ended up an average £50,332 richer overall than those who didn’t seek advice. Those falling into the ‘affluent’ category who sought financial advice ended up on average £43,353 better off than those who didn’t take advice. You can read the report here.
A separate independent study by Vanguard found that those with a financial advisor typically earned around 3% per year more than those without an advisor.
As well as the financial benefits, seeking professional advice can also help build financial resilience. A separate survey conducted by Royal London found that 44% of those who received advice said they felt prepared to deal with financial shocks compared to 32% of those who had not been advised.
Sarah Pennells, head of financial capability at Royal London, said: “We know that taking financial advice will have a positive effect on your financial wellbeing but what is less well known is how it can improve our emotional wellbeing. The fact that taking advice makes people feel more able to deal with financial shocks is particularly important in these current times. We all need to do more to ensure people know what to expect from receiving financial advice and the benefits it can bring.”
There are time savings to consider too. A financial advisor can do all the legwork and research on your behalf, helping track down the investments that are right for you and reviewing them regularly to make sure they are still a good fit.
Another benefit is that if you’re recommended a financial product which turns out to be unsuitable, you may be able to claim compensation for ‘mis-selling’. Bear in mind, however, that if an investment you’ve been recommended performs badly because markets fall rather than rise, you won’t be protected against losses.