13 July 2017

New research find those who receive financial advice are on average £40,000 better off than their unadvised peers

New report from leading independent think tank finds both affluent investors and those ‘just getting by’ better off than their equivalent un-advised counterparts

4 min read

Steve Webb
Royal London



A new report by the International Longevity Centre – UK (ILC-UK) and supported by Royal London finds that those who received financial advice in the 2001-2007 period had accumulated significantly more liquid financial assets and pension wealth than their unadvised equivalent peers by 2012-14.

The report, ‘The Value of Financial Advice’ analyses data from the largest representative survey of individual and household assets in Great Britain, the Wealth and Assets Survey. Even allowing for the fact that some groups are more likely to seek advice than others, the research still shows that those who receive advice do better than an equivalent group who don’t [1].

The report examines the impact of financial advice on two groups, the ‘affluent’ and the ‘just getting by’. The ‘affluent’ group is formed of a wealthier subset of people who are also more likely to have degrees, be part of a couple, and be homeowners. The ‘just getting by’ group is formed of a less wealthy subset who are more likely to have lower levels of educational attainment, be single, divorced or widowed and be renting.

The Value of Financial Advice’ finds that:

  • The ‘affluent but advised’ accumulated on average £12,363 (or 17%) more in liquid financial assets than the affluent and non-advised group, and £30,882 (or 16%) more in pension wealth (total £43,245)
  • The ‘just getting by but advised’ accumulated on average £14,036 (or 39%) more in liquid financial assets than the just getting by but non-advised group, and £25,859 (or 21%) more in pension wealth (total £39,895).

The report also finds that financial advice led to greater levels of saving and investment in the equity market:

  • The ‘affluent but advised’ group were 6.7% more likely to save and 9.7% more likely to invest in the equity market than the equivalent non-advised group.
  • The ‘just getting by but advised’ group were 9.7% more likely to save and 10.8% more likely to invest in the equity market than the equivalent non-advised group.

Those who had received advice in the 2001-2007 period also had more pension income than their peers by 2012-14:

  • The ‘affluent but advised’ group earn £880 (or 16%) more per year than the equivalent non-advised group.
  • The ‘just getting by but advised’ group earn £713 (or 19%) more per year than the equivalent non-advised group.

The report found that 9 in 10 people are satisfied with the advice received, with the clear majority deciding to go with their adviser’s recommendation.

Despite the advantages of receiving advice, only 16.8% of people saw an adviser in the years 2012-2014. Indeed, ‘The Value of Financial Advice’ finds that even amongst those who took out an investment product in the last few years, around 40% didn’t take advice, rising to 78% of people who took out a personal pension [2].

After controlling for a range of factors, ‘The Value of Financial Advice’ concludes that the two most powerful driving forces of whether people sought advice was whether the individual trusts an Independent Financial Adviser to provide advice, and the individual’s level of financial capability. Therefore, the report makes a series of recommendations to raise demand for financial advice including:

  • Using advice to support the auto-enrolled – duty on employers to ensure staff can access the best information and advice on their pensions.
  • Mandating default guidance for those seeking to access their pension savings – to ensure people can get crucial information in a complex marketplace and avoid worst outcomes.
  • Helping to create informed consumers through continued development and roll out the pensions dashboard.
  • Ensuring regulators continue to place emphasis on access to independent financial advice.

Ben Franklin, Head of Economics of Ageing, ILC-UK said:

Our results show that those who take advice are likely to accumulate more financial and pension wealth, supported by increased saving and investing in equity assets, while those in retirement are likely to have more income, particularly at older ages.

But the advice market is not working for everyone. A high proportion of people who take out investments and pensions do not use financial advice, while only a minority of the population has seen a financial adviser. Since advice has clear benefits for customers, it is a shame that more people do not use it. The clear challenge facing the industry, regulator and government is therefore to get more people through the “front door” in the first place.

Steve Webb, Director of Policy, Royal London said:

This powerful research shows for the first time the very real return to obtaining expert financial advice. What is most striking is that the proportionate impact is largest for those on more modest incomes. Financial advice need not be the preserve of the better off but can make a real difference to the quality of life in retirement of people on lower incomes as well. The evidence shows that when people take advice they are overwhelmingly satisfied and benefit as a result. More needs therefore to be done to overcome the barriers to advice.

A copy of the Value of Advice is available to download from www.ilcuk.org.uk

For further information please contact:

Steve Webb, Director of Policy

Ben Franklin


Dave Eaton

Notes to editors:

[1] The research uses a statistical technique called propensity score matching which identifies similar individuals within the data and then estimates the “treatment” effect of receiving financial advice. The value of advice is therefore the difference between the financial circumstances of those who were treated (received advice) from a similar group of individuals who did not receive it. It therefore seeks to mimic a natural scientific experiment.

[2] This may be the impact of automatic enrolment which nudges people into saving without the need for financial advice. Clearly though, over time given the research findings, it would make sense for people who are auto-enrolled to receive financial advice on their pension savings.

The International Longevity Centre – UK (ILC-UK) is a futures organisation focussed on some of the biggest challenges facing Government and society in the context of demographic change.

Much of our work is directed at the highest levels of Government and the civil service, both in London and Brussels. We have a reputation as a respected think tank which works, often with key partners, to inform important decision-making processes.

Our policy remit is broad, and covers everything from pensions and financial planning, to health and social care, housing design, and age discrimination. We work primarily with central government, but also actively build relationships with local government, the private sector and relevant professional and academic associations.

About Royal London:

Royal London is the largest mutual life, pensions and investment company in the UK, with funds under management of £117 billion, 8.8 million policies in force and 3,745 employees. Figures quoted are as at 30 June 2018.