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The value of advice

The value of something can be hard to quantify. How valuable a product or service is can be dependent on a plethora of different factors, including your own priorities. When weighing up how valuable something is you may consider the convenience, confidence or the long-term impact it has on your life. When looking at the value advice offers, it’s just as important to include a wide range of factors, rather than purely the financial benefits.

Among the many ways that financial advice can add value to your life are:

Convenience: Time is a valuable commodity. With hectic, modern lives, it’s understandable that some areas get left behind. From this perspective, working with a financial planner can free up your time to focus on other tasks, from work, to family, particularly if your situation means complex financial decisions need to be made.

Analysis from Hargreaves Lansdown proves convenience is something we’re willing to pay for. Amazon Prime, for example, has over 100 million members willing to pay for the convenience of next day delivery and having media on demand. Takeaways are another example. The research found in 2016, it was estimated Brits spent £9.9 billion on takeaway food, with an average weekly household spend of £4.70. When you compare this to the weekly food shop bill of £60, it indicates we’re willing to pay 8% of that value for the convenience offered for a single meal.

Managing finances can be time-consuming; from monitoring the performance of investment portfolios to finding the best home for savings. Advice is an area that can offer convenience for your money.

Personalisation: There’s a huge range of resources available that aim to help people make financial decisions. But, apart from the challenge of assessing the legitimacy of some sources, one of the key pitfalls of this is; how do you know if it’s right for you?

You may come across a piece in the newspaper looking at the top investments for the year. However, there’s no single investment strategy that’s right for everyone. Without contemplating your capacity for loss, attitude to risk, overall aims and more, it’s impossible to know if it’s an investment that could benefit you. Advice from a financial planner, on the other hand, takes a personal approach. As a result, the advice that’s offered can be directly influenced by aspirations, concerns and your current financial situation. In turn, this helps to deliver value to you.

Coaching: Financial advice goes beyond simply telling you to place your money into a pension or highlighting potential investment strategies. It can be used to coach you to make better financial decisions and improve your confidence. Bias naturally occurs when we make decisions, including those relating to money. Advice can help you see where and why these may be occurring, allowing you to make decisions based on logic and reasoning rather than your emotions.

Advice gives you an opportunity to see your finances and plan for the future from another perspective; it can offer valuable insight into where improvements can be made.

The financial impact

Of course, while other factors may have an influence, the financial impact advice has is important. After all, this is why you initially approached a financial planner. Research produced by ILC-UK found those who received financial advice accumulated significantly more liquid financial assets and pension wealth than unadvised peers. The research compared those who received financial advice in the period between 2001 and 2007 with those that did not seek any professional advice, comparing wealth again in 2012-14.

  • Those described as affluent and receiving advice accumulated on average £12,363 (17%) more in liquid financial assets and £30,882 (16%) more in pension wealth when compared to the affluent, non-advised group.
  • The benefit was even larger among those considered to be just getting by. The advised group accumulated on average £14,036 (39%) more in liquid financial assets and £25,859 (21%) more in pension wealth.

The above sums could have a significant impact on your overall financial security both now and in the future when retired.

Clearly, advice that can deliver tangible, measurable benefits such as increasing your wealth is valuable. However, even then it can be difficult to weigh up the difference between receiving advice and not. How would your investments have performed if you hadn’t followed the advice given? Would you still have had the confidence to increase pension contributions without the support of a financial planner?

As a result, it’s important to look at the bigger picture when evaluating the value advice has added to your life. Perhaps if you sought advice at the point of retirement, a financial planner hasn’t necessarily helped your pension provisions grow. They may, however, have:

  • Worked with you to understand what you want from retirement
  • Helped you feel confident that your income will last you a lifetime
  • Created a plan to pay for long-term care if necessary
  • Considered your estate and how it will be passed on to loved ones
  • Reduced or mitigated the Inheritance Tax bill your loved ones will pay
  • Highlighted potential tax-efficiencies you’re not taking advantage of

These actions may not have an immediate impact on your wealth, but they can add real value to your life.

What’s valuable to you?

When you’re calculating how valuable advice is to you, you need to take a closer look at what’s important. One person may consider the time saved to be the most valuable part of receiving financial advice. Conversely, another individual may place greater importance on the peace of mind delivered. To define value, you need to think about what’s important to you and how advice can complement this.

We work with people to understand what they want to get out of their life, and how their finances can help them do this. By taking this approach we aim to add real value that has a positive influence in a way that suits each person we work with. Through understanding what adds value to you, we can help you get the most out of seeking financial advice. If you’d like to discuss your situation, please contact us.

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