We invited Ian Porter, Financial Advisor and Director of Roberts Clifford Wealth Management, to write a guest blog and share his thoughts on the value of seeking financial advice.
What is the value of advice?
Many of us seek legal advice at pivotal moments in our lives: births, deaths, marriage, divorce, the purchase or sale of a property.
One thing that these events have in common is that there are almost always financial issues that should be given as much care and attention as the legal aspects but does this happen?
Recent research from Royal London suggests that few people take financial advice at all during their lives, in fact they identified that just 26% of the people they surveyed had done so.
What is odd about this number is that there is clear and empirical evidence to hand showing that financial advice makes those that take it better off, both emotionally and financially.
The emotional impact of taking financial advice cannot be understated. The International Longevity Centre UK (ILC) with whom Royal London worked on their research suggested the following as the top three benefits of taking financial advice:
- Feeling more confident in my financial plans
- Feeling in control of my finances
- Peace of mind
This rings true with my own experience of advising clients at pivotal moments, particularly after they have lost a loved one, are trying to deal with the practicalities of paying for care or when they are going through a divorce. However, I also understand that you cannot measure this benefit until you have felt it personally.
The financial impact of financial advice is more readily measured.
The ILC research found that, in the space of just 10 years, customers who had sought financial advice were, on average, £47k better off than those who had taken care of things themselves.
Given the fact the research spanned the last financial crisis in 2008, this is a remarkable number – and one which clearly highlights the value of financial advice, especially in times of crisis.
Even more noteworthy is the observation that those who fostered an ongoing relationship with their adviser were up to 50% better off than those who had only received financial advice once.
So why don’t more people take financial advice?
I think there are multiple reasons why taking financial advice is not considered a priority:
- The availability of information on the internet
- A fear of being “sold to”
- The potential cost of financial advice
Let us be quite clear, doing a Google search is not the same as consulting a highly qualified and experienced adviser. Google can provide a lot of information but this is not advice tailored specifically to you. No organisation can make a personal recommendation without engaging with you in a detailed consultation that allows them to be sure that that advice given is 100% relevant to you.
As for being sold to, it is often the organisations that give most information on the internet that are likely to be promoting their own products, trying to get you to buy without advice, making their money that way. Can you be sure that any organisation that only makes money from selling you a financial product is working in your best interests?
Most advisers are no longer salespeople. Commissions on pension and investment products were banned in 2013 and advisers have to agree directly with clients how much a job costs and how the bill will be settled (it can generally be paid from invested capital but only with client consent) BEFORE work is undertaken. Fees are not linked to the sale of anything they are related to the time taken to provide financial advice and the complexity of such.
You therefore get a chance to judge whether you think the cost is fair before committing to the proposed advice, and the adviser has the opportunity to put into context those costs (for example: “The fee is £1500 but I can save you £20,000 in tax this year”).
In Lady Windemere’s Fan, Oscar Wilde had Lord Darlington quip that a cynic was ‘a man who knows the price of everything and the value of nothing’. Out internet-based society has certainly shifted a lot of us towards cynic territory as electronic commerce removes, in most cases, any personal or emotional connection between client and “supplier” and makes price the key consideration.
Financial planning, however, is long-term in nature, built on mutual understanding, respect and a commitment on both sides to the process. The initial benefits can be more emotional wellbeing related than financial in the early years.
In the longer term, being kept out of the dual bear traps of high costs and poor performance whilst avoiding unnecessary payment of tax can deliver huge amounts of value.
Price may be one thing, but value is everything and value has little to do with price.
If you wish to read Royal London’s full synopsis of their research please click here.
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Ian Porter at Roberts Clifford can be contacted by calling 01323 404129 or emailing email@example.com.
Ian Porter is a Director of Roberts Clifford Wealth Management. Roberts Clifford is a trading Style of Occulus Wealth Management Limited, which is authorised and regulated by the Financial Conduct Authority.