Exactly where the line should be drawn beyond which professional financial advice should be sought is something of a sticking point to say the least. Some believe there’s no such thing as too early a time to take on a little helpful guidance, while other see no need to speak to financial advisers unless enormous savings are on the cards. But when you look at things in terms of averages, it’s apparent that there’s a glaring difference between the kind ofconsumers believe warrants advice, and the time at which the IFA community suggests advice should be sought.
According to the results of a recent survey carried out by Aegon, customers on average believe it only to be worth paying for independent financial advice when investments orsavings go beyond the £121,000 mark. By contrast, the IFA community itself insists that independent advice should be considered by anyone with investments or pension savings of £30,000 or more. This is clearly not a view shared by the public in general, with just 6% having stated that they would think paying for financial advice on a £30,000 pot would be worthwhile.
The Financial Conduct Authority (FCA) is currently working with the government on measures to ensure that helpful financial advice is both made readily available to savers at all levels and more proactively sought. What the research made abundantly clear was the way in which there is apparently no direct link between the way savers approach/view independent financial advice and how much money they actually have in their savings pots.
For example, the report published by Aegon stated than when individuals have savings in the region of £50,000, they are willing on average to pay around £190 for independent financial advice. Interestingly however, though with vastly larger savings pots of around £250,000 stated that they’d be willing on average to pay just £314 for financial advice. So despite having so much more money to one side, willingness to spend money on financial advice doesn’t change a great deal.
In addition, opinions as to the primary advantages of taking independent financial advice also seem to differ from one saver to the next.
For close to a third of all savers – 28% to be precise – the true value of seeking IFA assistance is knowing that the decisions they make with regard to their savings are the right ones. For 34%, simple peace of mind from consulting with an expert was the primary motivator for seeking advice, while 42% said that the main benefit of independent advice is that of expanding their savings pots.
On the IFA side of things, 63% of professional financial advisers stated that obtaining objective advice from a financial expert was the most important benefit of paying for such advice.
“There is a significant gap between what consumers believe they need to have saved before they seek advice, and the amount advisers believe is required to make advice worthwhile,” said Duncan Jarrett, managing director of Aegon UK.
“The government’s consultation on methods of extending advice needs to look at ways of reframing consumer thinking. Take a household example, as a car gets older many people opt for an annual service which can spot potential problems early.”
“While it involves a regular cost, it could pay you back many times over if it prevents a major expense at a later date.”