The wider benefits

of financial advice

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New research shows that sound financial advice boosts confidence and emotional wellbeing
Words by David Dolman

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 of how unforeseen events can rock the foundations of what we had thought was a stable financial footing.

 

The financial benefits of taking advice are well documented. Research undertaken by the International Longevity Centre UK (ILC) in 2019 showed that those who take advice are on average £47,706 better off in retirement than those who don’t1. But that’s not the end of the story.

 

Building on this study, the ILC has undertaken new research this year 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 this.

 

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 fewer than one in six 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 FCA 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.

Responsible investment beyond the coronavirus

How the investment community can help advance the environmental gains that have come out of COVID-19

The consequences of the coronavirus pandemic will clearly be profound, wide-ranging and long-lasting. So, it’s no surprise that any sources of optimism to be found as the crisis unfolds are quickly seized upon. Perhaps the most significant so far has come in the form of the immediate effects on the environment.

Greenhouse gas emissions have fallen, while data from NASA suggests that air quality has improved dramatically as countries around the world have taken steps to restrict activity and travel. Indeed, this could be an opportunity for organisations to rethink how they do business – and question whether they need to return to a form of normality in which, for example, employees are flown to meetings that could otherwise be held using video conferencing facilities.

A more realistic rate of change

Unfortunately, however, the environmental positives are likely to be temporary. Indeed, there is now a risk of efforts to address climate change becoming a lesser priority as governments focus on dealing with the economic implications of the crisis.

This is why the investment industry has an important role to play in maintaining the momentum that has gathered in recent weeks and months.

The biggest crisis now is clearly COVID-19, but the biggest crisis of the 2020s is still climate change, and we need to ensure that once we’re on the other side of the coronavirus pandemic that governments keep focusing on that.

But the environmental gains from the pandemic have clearly been made alongside painful social, economic and health consequences. In other words, the current rate of improvement is unsustainable.

If we’re taking climate change seriously, we would rather see a smooth transition at a rate less dramatic than we’re seeing at the moment. We don’t want to be in a position of having to bring a halt to everything, as we are now, in order to have that environmental impact.

We can invest for change

Responsible investing isn’t just about the environment, of course. The crisis has also shone the spotlight on corporate behaviours – both good and bad – and helped illustrate why businesses cannot simply be about making profits.

If they are going to be successful, they need to think about their wider stakeholders. Companies that have put measures in place for employees, for example, will come out of this with higher employee satisfaction and community spirit – and that contributes to their long-term success.

The importance of environmental, social and corporate governance (ESG) factors in investment decisions have only become clearer as the crisis has unfolded.

Investors increasingly seek information about sustainability and responsible investing, with growing awareness of the broader long-term aspects of successful and effective investing.

Anyone who wants to explore their responsible investing options should speak with a financial adviser.

To receive a complimentary guide covering wealth management, retirement planning or Inheritance Tax planning, contact David Dolman on 07713430539 or email david.dolman@sjpp.co.uk.