Understanding LISA interest rates: a comprehensive guide
Understanding LISA interest rates is crucial for individuals looking to make informed d...
Want to boost your wealth by 35%? Take advice!
In 2016, the then Justice Secretary, Michael Gove, said the British people had had enough of experts. If so, that’s a shame because taking advice is highly beneficial to an investor’s bottom line. Investors who took advice between 2004 and 2006 had a wealth uplift a decade later of £47,706.
Royal London commissioned the International Longevity Centre (ILC) to do a detailed analysis of the government’s Wealth and Assets Report,which followed the wealth management of thousands of people for a decade starting in 2004. The ILC published its findings in What It’s Worth: Revisiting the Value of Financial Advice.
It has been difficult to accurately quantify the difference that taking advice has made to an investor’s portfolio due to the range of factors that affect everyone’s decision-making. The ILC, however, was able to isolate the ‘advice effect’ by controlling for those factors.
Steve Webb, Director of Policy at Royal London, said, ‘This research uses the latest statistical methods to identify a pure ‘advice effect’ and it is strikingly large.’
The extra wealth as a result of taking advice is £31,000 of pension savings and over £16,000 of non-pension savings. The wealth uplift has a greater impact for those of moderate means. The affluent group earned an extra 24% of non-pension wealth (for example shares, ISAs, bank accounts) whereas the non-affluent group earned an extra 35%. While the uplift wasn’t as high for pension wealth, for the affluent it was still an extra 11% and the non-affluent, 24%.
David Sinclair, the director of the ILC, neatly summarised the report. ‘The simple fact is that those who take advice are likely to be richer in retirement.’
The explanation is straightforward. Those taking advice apparently chose to invest in assets with greater returns but also with greater risk. Taking advice added approximately eight percentage points to the likelihood of an investor shifting money into equities.
Finally, the ILC noted that investors who fostered an ongoing relationship with their financial advisers tended to have better financial portfolios as a result.
