Launched in the House of Lords on Thursday, 13th July 2017, this report, produced by ILC-UK with the support of Royal London, finds that those who received financial advice in the 2001-2007 period had accumulated significantly more liquid financial assets and pension wealth than their unadvised equivalent peers by 2012-14.

1. The Value of Advice
An ILC-UK and Royal London
Roundtable discussion
Thursday 13th July 2017
This event is kindly supported by Royal London
#ValueOfAdvice

2. Welcome from ILC-UK
Baroness Sally Greengross
Chief Executive
ILC-UK
This event is kindly supported by Royal London
#ValueOfAdvice

3. Welcome from Royal London
Isobel Langton
CEO Intermediary
Royal London
This event is kindly supported by Royal London
#ValueOfAdvice

4. Presentation
Ben Franklin
Head of Economics of an Ageing Society
ILC-UK
This event is kindly supported by Royal London
#ValueOfAdvice

5. The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
Putting a value on financial advice
Ben Franklin
follow us on twitter: @ilcuk @bjafranklin

6. The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
What am I going to cover?
 The purpose of the project
 Background: financial decisions, theory vs reality.
 How do we measure the value of advice.
 The impact of advice on behaviours and financial
outcomes.
 Is the advice market working for everyone?
 Options for increasing take-up of advice.

7. The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
The purpose of the project
• Lack of robust evidence on the value of financial advice.
• Little robust evidence on demand side factors that lead
to increased/reduced take up of advice.
• We seek to fill this evidence gap by:

8. The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
The purpose of the project
• Lack of robust evidence on the value of financial advice.
• Little robust evidence on demand side factors that lead
to increased/reduced take up of advice.
• We seek to fill this evidence gap by:
1. Robustly estimating the added value of
advice.

9. The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
The purpose of the project
• Lack of robust evidence on the value of financial advice.
• Little robust evidence on demand side factors that lead
to increased/reduced take up of advice.
• We seek to fill this evidence gap by:
1. Robustly estimating the added value of
advice.
2. Assuming there is a positive impact, to
develop evidenced based recommendations
to reduce barriers and increase demand.

10. The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
What are financial decisions for?
In theory:
To maximise wellbeing over the
lifetime
• Life cycle theory – smoothing
consumption
• Saving and investing when
young to support lifetime
income. Consume wealth
when old.
• Prioritising larger gains
tomorrow over smaller ones
today.

11. The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
But the reality is quite different
We are prone to making errors due to a
number of behavioural biases including:
• We prefer rewards today over rewards
tomorrow.
• We weight losses about twice as much
as gains.
• We switch off in the face of complexity.
• We are prone to procrastination.

12. The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
But the reality is quite different
We are prone to making errors due to a
number of behavioural biases including:
• We prefer rewards today over rewards
tomorrow.
• We weight losses about twice as much
as gains.
• We switch off in the face of complexity.
• We are prone to procrastination.
In theory financial advice should reduce our number
of errors leading to better financial decision making
and a higher level of lifetime income

13. The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
Data: Wealth and Assets Survey – Waves 1 to 4
Method:
1. Test the impact of receiving financial advice in 2001-2007 on the
following financial behaviours in 2012/14:
 Saving for retirement.
 Participating in the stock market.
 Delaying/changing the date of retirement.
2. Test the impact of receiving financial advice in 2001-2007 on the
following financial outcomes in 2012/14:
 Value of liquid financial assets.
 Value of pension assets.
 Income in retirement.
How do we measure the value of advice?

14. The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
Defining financial advice
“In the last five years, have you received any professional
advice about planning your personal finances? By that I
mean things life planning for retirement, tax planning, or
investing money. But please do not include any advice
related to running a business or mortgages”
Wealth and Assets Survey

15. The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
The geeky bit! How do we deal with self-selection?
Big problem – people who take advice may be more
prone to better financial decision making anyway.
What can we do to counteract this bias?
 Identify the characteristics that make people more likely
to take advice (i.e. wealth, sociodemographic
characteristics, behaviours, risk tolerance etc.).
 Amongst those who are more likely, identify the impact
of advice on the behaviours and financial assets of
those who took advice vs those similar individuals who
didn’t.

16. The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
The geeky bit! How do we deal with self-selection?
Big problem – people who take advice may be more
prone to better financial decision making anyway.
What can we do to counteract this bias?
1. Identify the characteristics that make people more likely
to take advice (i.e. wealth, sociodemographic
characteristics, behaviours, risk tolerance etc).
2. Amongst those who are more likely, identify the impact
of advice on the behaviours and financial assets of
those who took advice vs those similar individuals who
didn’t.
We use a technique called propensity score matching

17. The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
Impact of advice on behaviours
• 8.6 percentage points more likely to be saving in
2012/14.
• Rises to 9.7 percentage points amongst less
wealthy subset.
• 10.4 percentage points more likely to have risky
assets in 2012/14.
• Rises to 10.8 percentage points amongst less
wealthy subset.
…so those receiving advice are saving more and
investing more

18. The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
Impact of advice on financial outcomes
• £13,435 more in liquid financial assets by 2012/14
• Rising to £14,036 amongst less wealthy subset (39% more wealth than
equivalent non advised)
• £27,664 more in pension wealth by 2012/14
• Rising to £30,882 amongst the most wealthy subset (16% more than
equivalent non-advised)
• £25,859 more amongst less wealthy subset (21% more than equivalent
non-advised).
• £773 more pension income in 2012/14.
• Rising to £880 amongst the most wealthy subset (16% more than the
equivalent non-advised)
• £713 more amongst less wealthy subset (19% more than non-advised
Effect on financial outcomes is large – particularly amongst
less wealthy subset in proportionate terms

19. The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
The value of advice in numbers
Source: ILC-UK calculations using Wealth and Assets Survey 2006-8 and 2012-14

20. The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
But the market is not working for everyone
Advice uptake remains low
• Only 16.8% of people saw an
adviser in the years 2012-
2014.
• Even amongst those who took
out an investment product,
less than half received
advice.
• Only 18% of those who took
out a personal pension saw an
adviser
Numbers of IFAs growing but remain below 2011
levels
Source: APFA

21. The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
If advice works the key issue is getting people through the
front door….
• Using advice to support the auto-enrolled
• Default guidance for those seeking to access their pension
savings
• Helping to create informed consumers through the
pensions dashboard
• Harnessing technology to promote advice services
• Regulation should continue to place higher emphasis on
accessibility
Potential options

22. The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
Many thanks
Ben Franklin
International Longevity Centre - UK
02073400440
Twitter: @ilcuk @bjafranklin

23. Response to findings
Sir Steve Webb
Director of Policy
Royal London
This event is kindly supported by Royal London
#ValueOfAdvice

24. Discussion
This event is kindly supported by Royal London
#ValueOfAdvice

25. Final Reflections
Ben Franklin
Head of Economics of an Ageing Society
ILC-UK
This event is kindly supported by Royal London
#ValueOfAdvice

26. Close
Baroness Sally Greengross
Chief Executive
ILC-UK
This event is kindly supported by Royal London
#ValueOfAdvice

27. Future of Ageing Conference 2017
Wednesday 29th November 2017
London
Early Bird tickets available
Visit www.ilcuk.org.uk for more details.