We explore the characteristics of people who receive financial advice, and the wealth benefits associated with taking advice.
Read the research note (PDF)[1]
Many people struggle to access affordable financial advice. We want to address this by broadening the range of financial support available to consumers through our Advice Guidance Boundary Review[2].
Our research reveals evidence of a positive association between existing, regulated financial advice and wealth, particularly in the initial years following advice.
We estimate up to a 10% increase in wealth in the years following financial advice, relative to those who didn’t get advice. However, we find that this relationship fades and becomes more uncertain over time.
We also find that existing financial advice is:
- Usually accessed by wealthier, older individuals.
- Likely to be more valuable for people receiving lump sum payments like inheritances, gifts or one-off pension payments.
Estimating the true value of financial advice is complex. Our research attempts to account for 2 common issues – reverse causality (wealthier people get advice) and selection bias (people who seek advice would create more wealth even without it).
To do this, we use data from the Office for National Statistics’ (ONS) Wealth and Assets Survey, covering 2010 to 2020, to compare changes in wealth over time for people who received regulated financial advice with those who did not, while accounting for measurable differences between the 2 groups.
In seeking to understand the benefits of existing advice, this research forms part of a wider programme of work supporting the design of effective new, different financial support services.
Authors
Stella Capuano, Sam Hainsworth, Deanna Karapetyan, Mark Mitchell and Alex Stroud.
Disclaimer
Research notes contribute to the work of the FCA by providing rigorous research results and stimulating debate. While they may not necessarily represent the position of the FCA, they are one source of evidence that the FCA may use while discharging its functions and to inform its views. The FCA endeavours to ensure that research outputs are correct, through checks including independent referee reports, but the nature of such research and choice of research methods is a matter for the authors using their expert judgement. To the extent that research notes contain any errors or omissions, they should be attributed to the individual authors, rather than to the FCA.