We have compiled some interesting research done over the last 5 years to substantiate the value of Financial Planning:

1. KPMG EconTech – Proposition of Financial Advisory Networks – Update and Extension prepared for the Financial Services Council (Australian based):

• Advised individuals save $1,725 more per annum than non-advised individuals (with the cost of the setting up that financial plan being an average of $530);
• The additional retirement assets that will be accumulated (3% real growth rate retirement age 65) would be:
  • Start at 30 $ 91,000;
  • Start at 45 $ 80,000;
  • Start at 60 $ 29,000.

• Additional analysis also revealed that those with an adviser were:
  • Four times more likely to hold insurance;
  • Held more life insurance;
  • Held more disability insurance.

In a country that has a R 7.3 trillion shortfall in life cover and R 11.1 trillion shortfall in disability cover (True South and UNISA BMR 2010 insurance gap study) it is clear that the consumer and State will benefit in more consumers having a relationship with a financial planner.

2. The Value of Advice Standard Life UK (2012):

• Current average pension “pot” available to consumers in the UK at date of retirement – for those who have sought financial advice – is nearly double that of those who did not access financial advice;
• On average, the investment value of the portfolio of consumers who received financial advice was over Forty Thousand Pounds higher than the value of portfolios belonging to consumers who did not get financial advice;
• On average, advised people tend to contribute greater amounts to their retirement leading to substantially higher pensionable amounts being available on retirement;
• On average, non-advised persons contribute 108 pounds per month to retirement and for an average period of 17.5 years;
• Advised persons contribute 167 pounds per month and for an average period of 18.5 years.

3. The future of retirement: The Power of Planning HSBC Bank – Global Report (2011), (based on interviews with more than 17,000 people in 17 countries):

• A ‘planning premium‘ emerges in which households with financial plans enjoy two distinct advantages. Firstly, those who undertake financial planning enjoy hard financial benefits: not only do they hold a much broader range of financial assets at their disposal to fund their retirement, but also the value of those retirement assets is likely to be significantly greater. The planners are amassing two-and-a-half times as much in their retirement savings as non-planners. Secondly, the planning premium includes softer benefits such as enabling people to feel more confident about later life, and to worry less about coping financially in retirement;
• Those who combine financial planning with professional financial advice enjoy the best of both worlds with retirement assets close to USD 50,000 – over three times more than the non-planners – demonstrating an ‘advice advantage‘;
• The planning premium and advice advantage also apply to non-retirement savings and investments. Planners have amassed over three times more (219%) than non-planners in their non-retirement assets. On average, those who take professional advice and have financial plans have amassed over five times (418%) the non-retirement assets of those who do neither.

4. Canada Case Study (2013):

Those with comprehensive plans feel:

• More on track with their financial goals and retirement plans
• That they have improved their ability to save in the past five years
• More confident that they can deal with financial challenges in life
• Better able to indulge in their discretionary spending goals

Regardless of net worth, Canadians who engage Certified Financial Planner^® professionals for their financial planning needs report that they are experiencing significantly higher levels of financial and emotional well-being.

• On track with financial affairs: 81% of those with comprehensive financial plans feel on track with their financial affairs, versus 73% with limited planning and only 44% with no planning
• Able to save: 62% of those with comprehensive financial plans report that they have improved their ability to save in the last five years, versus 56% with limited planning and only 40% with no planning

Conclusion

General trends found in all the research conducted above included the following themes. People with financial advisors…:

• Enjoy more wealth than those who are not;
• Accumulate more assets in their lifetimes;
• Hold more financial assets in retirement than those who are not;
• Act and invest in a more tax efficient manner;
• Are prepared to retire comfortably as opposed to those who are not.

We therefore encourage you to engage with one of our financial planners to start the journey and to allow us to add value to enable you to build a meaningful life.

Compiled by: Hendri de Klerk

Sources – FPI