To follow on from my previous blog post, simplifying financial advice may help some people but one key question is: “Does financial advice actually improve wealth?”
The FCA attempted to answer that question in a Research Note – see https://www.fca.org.uk/publication/research-notes/bridging-advice-gap-estimating-relationship-between-financial-advice-wealth.pdf .
Here’s a key paragraph from the report: “Our findings suggest that financial advice positively supports wealth accumulation, especially in the initial years after advice is received. Our empirical findings reflect the qualitative insights from the literature which suggest financial advice helps consumers to avoid costly mistakes. Examples of these costly mistakes include inefficient tax planning, excessive cash holdings, or a non-diversified wealth portfolio. The short-term benefits of receiving advice could reflect consumers taking informed decisions that avoid these issues, providing an initial boost to wealth”.
One key message is that taking some financial advice is particularly worthwhile if you suddenly become richer.
Roger Lawson (Twitter: https://x.com/RogerWLawson )
You can obtain notifications of new posts in future by following me on Twitter (now “X”) – see https://x.com/RogerWLawson where new blog posts are usually mentioned.