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Smart investors know that financial advice is the best route to wealth

In these uncertain times, financial security is at the forefront of everyone’s thinking. Making the right decisions is critically important for investors, particularly as volatile markets can trigger emotional reactions that can result in damage to long-term wealth accumulation strategies.

Perhaps now more than ever, it’s important for people to listen to the experts and take advice from qualified financial advisers.

What sort of people normally choose to get advice from a qualified professional? Logically, you would think that people who have plenty of wealth are the most obvious candidates but there’s more to it than that.

According to the findings of a research report from the International Longevity Centre entitled ‘The value of financial advice’, which was first published in 2017 and then updated in 2019, ‘financial capability’ is also an important factor.

While earners in the top quartile are 12% more likely to engage a financial adviser than low earners, it doesn’t always follow that those with wealth will seek, or take, advice. The original report highlights that it’s people who are fairly savvy about financial matters who recognise that they might need some help. This is regardless of how much wealth they actually possess.

Highly financially capable people are 8% more likely to seek advice. Sadly though, this doesn’t always mean they listen: the report highlights they are 10% more likely to go against any advice received.

Those who sought advice were significantly more likely to save and/or invest in the equity market, with the bulk of the advice taken on investments (27%), mortgages (24%) and pensions (15%).

Over £47,000 better off

With so much ‘self-help’ about managing finances on the internet these days, many individuals who think they are financially capable take the decision to manage their own affairs. This can be a costly mistake.

The report shows that those who engage with a financial adviser over the long term – and continue to take their advice – increase their wealth significantly more than those who decide to go it alone. The headline takeaway is that people who receive on-going financial advice are an average of £47,706 better off than those that don’t. This seems to indicate that those who think they are financially savvy enough to go it alone may not be as clever as they think!

Other interesting data from the report shows:

  • Those who took advice were likely to save more as well as to invest in the equity market.
  • They ended up with more financial assets and pension wealth than similar individuals who did not take advice who tend to end up in low return products like cash ISAs.
  • Advisers enjoy a high degree of trust and loyalty, with two thirds of their clients relying on just one adviser to help them make decisions.

For any advisers looking to expand, it seems targeting people who have a high degree of financial capability could prove a rewarding strategy, especially once those people realise that it’s the really savvy people who use advisers and enjoy a better chance of increasing their wealth.

Read more articles on our insights page


About the author

Dave was one of the pioneers in the development of the investment platform market at Skandia UK. Prior to joining PortfolioMetrix, he was Chief Commercial Officer at back office software producer, Intelliflo - experience that gives him a unique insight into the needs of the independent adviser community and its customers.

Find out more at portfoliometrix.com


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