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Advice improves financial, mental well-being

financial advice mental well-being

New research has found the take-up of financial advice by consumers can have a positive impact on mental well-being alongside the usual monetary benefits.

Financial advice is instrumental in leading to a stronger sense of mental, as well as financial, well-being, according to new report from a large-scale investment manager.

Fidelity International’s “Value of Advice” report found 21.1 per cent of people who accessed advice believed their financial well-being improved dramatically since receiving that advice, with a further 53.2 per cent reporting a slight improvement.

At the same time, of those surveyed who received advice, 49.9 per cent claimed the non-financial aspect of their life that had benefited the most as a result of the advice was their mental health and well-being, ahead of family life (34.8 per cent) and work satisfaction (21.4 per cent).

The research, carried out by CoreData during November 2019, engaged with 502 people who were currently receiving advice, as well as a further 570 who had previously received advice and 1156 people who were unadvised, for a total sample size of 2228.

Fidelity International Australia managing director Alva Devoy said other research on the outcomes of advice had found there was a financial benefit, but this research examined other effects that resulted from the take-up of financial advice.

“We know the statistics and can quantify the numerical values in investment returns, but this is a second-order effect and if we can highlight this, it should become a very important second-order effect,” Devoy said.

“Without prompting, mental health was chosen by nearly 50 per cent [of respondents], and it is a highly topical issue at the moment and anything we can do to benefit that issue we should be doing.”

The research also found that while 19.1 per cent of all respondents rated their financial well-being as very high or high, and a further 51.8 per cent rated it as moderate, 77.3 per cent of respondents would consult a doctor for their personal well-being, followed by a mental health professional (35 per cent), ahead of a financial planner or adviser (24.9 per cent).

“This is an interesting disconnect that we can shine a light on and how we can frame this up for the advice industry in terms of the value of advice, and this research and outcomes should get us to the point in five years’ time that it is the norm to have a financial adviser,” Devoy said.

The report also examined the key areas of financial concerns among the survey respondents and found 55 per cent of pre-retirees believe they will have to work past retirement age, while 52.6 per cent are concerned they might be unable to afford to live where they want in retirement.

Of the 1522 survey respondents who were not retired, only 37.8 per cent stated they were very prepared or reasonably prepared for retirement, with the issue being flagged as the main driver for seeking advice from the 502 respondents who had already received it.

“It is concerning that more Australians aren’t aware of the benefits that financial advice can bring, not just to their finances but to their overall quality of life,” Devoy said.

“People often seek advice due to a life event or milestone such as retirement, but those who receive advice then go on to report the benefits are much wider reaching. These include being able to live their desired lifestyle, not having to worry about money, improved mental health and better relationships with their family and friends. This makes it clear that financial advice does more than help with just their financial well-being.”

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