Financial advice is more important than ever. Not only have changes in pensions and financial regulation placed more responsibility for planning retirement income into the hands of individuals, but the coronavirus pandemic has also reminded us all that unforeseen events can rock the foundations of what we had thought was a stable financial footing.
The ILC has undertaken research that shows financial advice could be an important factor in promoting mental health and wellbeing. Its report “Peace of mind: Understanding the non-financial value of financial advice” finds that non-financial benefits may be at least as important as the more easily visible financial ones in achieving this1.
Participants in the study who had taken financial advice reported that they felt less worried about their future, enjoying the peace of mind that comes from knowing that proper preparation has been made for their later years – and that included those who were already in retirement.
They felt more confident that they would achieve their long-term goals and, through their interactions with an adviser, felt more financially literate and able to understand how those goals would be achieved – and more empowered to make complex financial decisions for themselves. Being in control of their financial future in these ways left them feeling reassured and less worried than they would otherwise have been.
But despite these benefits, there remains a significant ‘advice gap’, with very few people taking advice. This stems partly from a lack of awareness of the benefits of seeking advice and of how and where to find it. Among those who haven’t taken financial advice, some – especially women – were worried that doing so would actually result in a loss of control, and that decisions would be taken out of their hands, but the experience of the advised participants showed this to be an unfounded fear
However, it remains clear that identifying long-term goals and establishing a financial structure to achieve them results in greater emotional wellbeing. Closing the ‘advice gap’ is a vital next step in giving that peace of mind to all.
So, the ILC is calling on government, the industry, and the Financial Conduct Authority to work together to remedy the situation by highlighting both the non-financial as well as the financial benefits of advice, and reassuring individuals that advice will be tailored specifically to their goals.
A financial adviser can help with your own financial planning.
1 Peace of mind: Understanding the non-financial value of financial advice, ILC, 2020