Revealed: The value of financial advice to your clients

A couple of months ago, we looked at why it’s so important to build relationships between professional advisers in order to provide a seamless service to the client.

By establishing partnerships with other professionals, we can ensure clients receive a genuinely holistic service. For example, a client going through a divorce may need:

  • Legal advice regarding the divorce, the division of assets and issues relating to children
  • Financial planning advice to help them start to prepare and plan for the long term
  • Tax advice from an accountant (especially if they are a business owner).

Sometimes, it can be tricky to explain the true value of financial advice to clients. Now, though, a major study has looked at just how much clients benefit from taking professional advice.

The value of financial advice

In 2017, the International Longevity Centre (ILC) published its report The Value of Financial Advice. This ground-breaking study quantified the value of taking financial advice on people’s overall financial outcomes.

Now, the ILC has updated their report, investigating how the benefit of financial advice has changed by including an additional two years.

The key findings of the report are:

  • Receiving professional financial advice between 2001 and 2006 resulted in a total boost to wealth (in terms of pensions and financial assets) of £47,706 in 2014/16
  • The benefits of financial advice for ‘affluent’ groups in terms of pension wealth was 11%
  • The benefit of financial advice for the accumulation of pension wealth is now £30,991
  • In terms of financial assets, the benefit of financial advice is now £16,715 in 2014/16 with a greater impact for ‘affluent’ clients
  • Financial advice increases the probability of having savings by 1%

Why does taking advice mean your clients are likely to be better off?

One reason is that taking financial advice increases the probability of having risky assets (e.g. stocks and shares) by 7.5%.

Non-advised clients are more likely to hold their savings in cash-based investments such as ISAs, where the returns are often lower (if less risky).

Fostering a long-term relationship also adds value

As part of their study, the ILC also looked at whether there were benefits to building and maintaining a relationship with a financial planner over time.

The research looked at the outcomes of accumulated pension and financial wealth for those who reported receiving financial advice at the start of the study only and compared this to those who reported taking advice at both time points.

The evidence suggests that fostering an ongoing relationship with a financial adviser leads to better financial outcomes. Those who reported receiving advice at both time points in the analysis (around eight to ten years apart) had nearly 50% higher average pension wealth than those only advised at the start.

The non-financial benefits of financial advice

We’ve seen that getting professional financial advice can help clients to be better off. However, there are also many intangible benefits of financial planning.

An objective opinion

If clients look after their own investments, it’s easy for them to be swayed by the news or by articles they read in the press. Investment decisions can often be driven by emotion: by greed or fear, by worry or panic.

Having a financial planner as a sounding board helps a client to remain objective and to stay on course. They can execute trades based on analysis and information, providing advice where necessary and encouraging clients to take the emotion out of decisions.

This can be particularly important when the economy or markets are uncertain. Picking the right investment vehicle is important but timing your entry and exit is just as important.

Peace of mind

Forming a trusted long-term relationship with a financial adviser means a client can relax in the knowledge that a qualified professional is taking on many of their financial stresses and strains.

They don’t need to check the markets, make trades or worry about their wealth. Their adviser can do all this for them, giving them peace of mind and the freedom to concentrate on more important matters.

Skill, knowledge and experience

A qualified financial planner brings a wealth of knowledge and experience. Just as you may have trained for years and passed a series of exams to be permitted to advise in your specialist area, a financial planner has to undertake the same level of training and development.

This is even more true for a Chartered firm such as Sovereign. For us to achieve this ‘gold standard’ in financial planning, we have to demonstrate:

  • The highest levels of technical knowledge through professional qualifications
  • A commitment to the ongoing development of our skills and knowledge
  • An adherence to ethical conduct

All this means that we’re adding significant value to your clients, in terms of our level of ethics, skill and knowledge.

Get in touch

We’re here to advise you and your clients on all aspects of financial planning. If you have clients that would benefit from advice, or you’re interested in how you can work more closely with us, please get in touch. Email or call 01454 416 653.

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