Is It Really Worth Paying For Financial Advice?

It’s not uncommon for people to initially feel a little put off by the cost of financial advice, especially when they feel they are being offered cheaper alternatives or could even try managing their investments themselves. With so many options available, is it really worth paying for financial advice?

Let the numbers speak for themselves

Recent studies have shown that financial advice really can be a skill worth paying for. According to a report from the International Longevity Centre – UK (ILC-UK), those who received advice in 2001-2007 had accumulated significantly more liquid assets and pension wealth by 2012-2014 than their equivalent peer group that had not received advice.

Don’t exclude yourself from financial advice

There’s a common misconception that financial advice is reserved for the exceptionally wealthy. The two peer groups that were studied in the above-mentioned report from the ILC-UK were the “affluent’ and the “just getting by”, and it highlighted that financial advice can be beneficial for those with a wide range of financial circumstances. The advised from the “affluent” group were on average 17% better off in liquid financial assets and 16% better off in pension wealth than their non-advised “affluent” equivalent. The advised from the “just getting by” group had on average accumulated 39% more in liquid assets and 21% more in pension wealth than their non-advised “just getting by” peers; in real money this equated to an average total of £39,895 more. That’s a pretty significant number.

Why does a financial adviser have this impact?

This might seem like an obvious question with an obvious answer. Financial advisers are highly skilled, and qualified to give financial advice; as the industry experts you might think that those receiving their advice should be accumulating more wealth simply because an adviser knows more about investments. The reality, however, extends much further than this. A study by Vanguard suggested that the impact of receiving financial advice could be an improvement of as high as 3% on long-term outcomes. They attribute as much as 1.5% improvement to the behavioural advice alone, such as helping clients write, understand and adhere to a financial plan. It’s like having a coach, but for your finances. Suddenly with these figures, the fees for financial advice are looking somewhat more appealing.

It’s an emotional rollercoaster

Well, it is for you. It’s your money, after all, and that’s a pretty emotive subject. Add in some inevitable fluctuation in the market, and remaining level-headed in your decisions is starting to become even harder. A great financial adviser helps to keep your fears and emotions in check, and helps you make clearer, fact-based decisions.

NB: The value of the investment can go down as well as up and you may not get back as much as you put in.

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