Revealed: the wellbeing and emotional impact of financial advice
It should come as no surprise that we believe financial advice adds real value to the lives of our clients. While the financial benefits of advice are often discussed, the value it can add in terms of wellbeing is sometimes overlooked, but is just as valuable.
The improvements to wellbeing that financial advice can offer can be difficult to assess. After all, every client will have differing goals, priorities and challenges.
New research from Royal London has measured how professional financial advice can support emotional wellbeing.
Financial advice helps people feel in control and confident
The research found that the vast majority of the 17 million people who seek financial advice in the UK benefit from a positive experience. Overall, it helps people to feel confident, in control of their finances and gain peace of mind. Clients rated three key areas that highlight the positive impact from receiving support from a financial adviser:
Quality of advice and expertise (82%)
Communication style (81%)
The most important value identified by the report is the value of understanding your financial matters.
When searching for financial products or information, you’re often confronted with jargon and complex terms. Even when you have a good handle on your financial situation this can be daunting, making it difficult to know what’s right for you. Besides, products, legislation and regulation frequently change and keeping up to date can be challenging if it’s not part of your day-to-day role.
Those receiving advice feel up to three times more confident in their understanding of products and their finances than those who haven’t worked with an adviser. Some 23% of non-advised individuals said they would not know where to start when asked about life insurance, compared to just 7% of those taking financial advice.
The financial decisions you make have a long-lasting impact and it’s important to understand products and your options. We’re here to explain to clients how different products work, as well as outlining the pros and cons with their situation in mind. It means clients can have confidence in not only their plans but also their financial knowledge.
The benefits of preparing for the unexpected
When people first approach a financial adviser, it is often to seek advice on something they know is going to happen or would like to happen. For example, planning for retirement or setting up an investment portfolio to create an income.
However, an important part of creating a financial plan is to look beyond this to plan for the long-term, including the unexpected. As a result, financial planning can improve financial resilience and ensure you’re better prepared for an unexpected shock, such as redundancy or illness.
It’s a step that boosts emotional wellbeing. Some 63% of clients said they felt secure and stable, as opposed to 48% who did not receive advice. The report highlighted how it can have an impact on emotions too. Four in ten (41%) of those that do not take financial advice said they feel anxious about their household finances, compared to three in ten (32%) who receive advice.
Protection products in particular improved financial and emotional wellbeing. These insurance products pay out under certain circumstances and should align with your priorities and concerns. For instance, life insurance can provide peace of mind that your family will be financially secure should you pass away, while income protection can provide an income if you’re unable to work due to illness. Clients who received advice on protection said it helped them feel more prepared and less worried about the future.
Unsurprisingly, the Coivd-19 pandemic has reenforced how planning for the unexpected can be valuable. With millions of employees seeing their income fall and facing redundancy, 35% said they felt anxious about their financial situation. This has led to 65% saying they’ve come to appreciate the value of being more prepared for life-shocks that may be outside of their control.
On average, financial advice clients are £47,000 better off
While the emotional benefits of advice are important, the financial benefits are too. After all, financial freedom can help you to achieve goals and feel more confident about your future.
The report also covers previous research conducted by the International Longevity Centre UK. It found that customers who took financial advice were on average £47,000 better off. Those who fostered a long-term relationship with their adviser were up to 50% better off than those who received one-off financial advice.
Tom Dunbar, Intermediary Distributions Director at Royal London, said: “We have long suspected that the benefits of advice go far beyond financial gains alone and our research confirms that individuals who have received advice are more likely to feel confident about the future, and less likely to feel anxious or worried.
“It’s easy to see why clients turned to financial advisers when the pandemic struck. But advice is most powerful – and most rewarding – when it goes beyond a one-off meeting. An ongoing relationship with an adviser amplifies the emotional, as well as the financial, benefits.”
Please contact us if you’d like to arrange a meeting to discuss how financial advice can help you and improve your wellbeing.
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.