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Want to be £47K better off and boost your confidence?

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Financial advice not only pays for itself, but boosts confidence and preparedness for retirement, a new report finds.

  • People who take financial advice are, on average, £47,000 better off in retirement than people who don’t – and this is especially true for less affluent groups.
  • People who receive advice are also more confident, worry less and are better prepared for retirement than those who don’t take advice.
  • However, a significant advice gap remains, with less than 1 in 6 people in the UK currently taking advice.

A new report launched by the International Longevity Centre UK (ILC) has reported that beyond yielding significant financial returns, financial advice also boosts confidence and preparedness for retirement, but that too few people are accessing advice. The self-employed, are notoriously leaving their financial future left to chance as they focus in the here and now in running their business. But if they knew they could be £47,000 better off or even more, will they make the move and do something about it?

However, despite the far-reaching benefits of financial advice for people of all income levels, there remains to be a significant advice gap in the UK, with less than 1 in 6 people taking advice and particularly low uptake rates for women. Key barriers identified in the report are a lack of awareness of what advice is (and is not) and a lack of knowledge of where to find an adviser.  

The onus is on you

With changes in pensions and financial service regulations over the past years placing increasing responsibility on individuals to plan for their own retirement income, ILC argues that professional financial advice has never been more important.

Building on previous research, which found that taking advice leads to an average increase in retirement income of £47,000, ILC’s new qualitative analysis, supported by St James’s Place, finds that financial advice moreover significantly improves financial literacy, boosts confidence, gives people greater control of their finances, offers greater reassurance, and provides greater peace of mind and security.

According to one male interviewee who is in the 55- 74 age group and classified as having ‘lower wealth’, said, “Financial advice has made me a lot more confident. It’s more security, and peace of mind, and knowing that, for current situations and the future as well, I’ve sat down and I have made goals.”

Arunima Himawan, Research Fellow, ILC, said, “In a time where so much responsibility is put on us as individuals to plan for an uncertain future, financial advice has never been more important.”

“It’s much too easy to put financial planning off, and even more so when we’re overwhelmed with the day-to-day, we’re worried whether we will make do today, or we simply don’t know where to start. So having someone who can guide us along the way and can point us in the right direction is crucial. It’s not just about maximising retirement income, but about making a plan, feeling in control and having peace of mind,” said Himawan.

But despite the many benefits of advice, far too few people gain access to the support they need to maximise their financial and mental wellbeing. This is not a new challenge, according to Himawan, and there are no easy solutions.

“We have been talking about the advice gap for well over a decade,” she said.

“It is undeniable that many people who would benefit in so many ways from advice simply do not access it,” said Nigel Waterson, ILC Trustee and former MP commented. “Government, industry and the regulator have a big role to play to help more people get in the “front door” to receive the advice they need.”

ILC is calling on Government, industry and the regulator to work together to extend the take-up of advice and ensure an extra five million people understand enough to plan for later life by 2030 by:

  • Highlighting both the non-financial as well as the financial benefits of advice
  • Reassuring individuals, through marketing and policy interventions, that the advice which they will receive is designed for their specific needs
  • Increasing the supply and efficiency of advice with the support of technology and through better recruitment and training opportunities.

Before you choose a financial advisor, check out Which? to see what to look for in an advisor, compare fees and also learn more about a Self-invested Pension Plan or SIPP (see costs table here ) if that may suit you. Then you can go on to Unbiased, which lists financial advisors that may be in your area.

One of the most important questions you can ask an advisor is the level and longevity of their experience advising people who run their own businesses or are limited company directors, for example. Ask for a couple of examples. And, if they will provide you with unbiased advice that is not linked to any client commissions or broker fees that their firm may be linked with.

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