As well as providing pecuniary benefit, financial advice also boosts confidence and preparedness for retirement, but that too few people are accessing advice, according to a new report.
The report from the International Longevity Centre UK (ILC) argues that, with changes in pensions and financial service regulations over the past years placing increasing responsibility on individuals to plan for their own retirement income, 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.
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 fewer than one in six 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.
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.
It also wants the government to reassure individuals, through marketing and policy interventions, that the advice which they will receive is designed for their specific needs and grownthe supply and efficiency of advice with the support of technology and through better recruitment and training opportunities.
Arunima Himawan, research fellow at 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.
“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 and there are no easy solutions. We have been talking about the advice gap for well over a decade.
“To achieve real change, we urgently need to see collaboration across industry and government to better communicate the financial and non-financial benefits of advice, to explore ways of reaching a more diverse customer base and to increase the supply and efficiency of advice.”