What's the cost of no advice?

First published on 24 of March 2015 • Updated 12 of December 2018

How could one small piece of financial advice make you richer by £15,000? The cost of financial advice deters many UK consumers, but long-term studies support the theory that it's those who take advice who end up better off. Article by Nick Green.

A financial adviser gives advice to a young professional woman

Once upon a time, financial advice was free. And like most things that start with ‘once upon a time’, that’s a fairy story. Truly independent financial advice has never been free, though before modern regulation many people were sold products by ‘advisers’ who earned commission – and who were therefore not unbiased.

Today advisers must have transparent fees, so it’s much easier to tell whether they are truly independent and unbiased. However, if you’ve never taken advice before, it might be hard to judge whether these fees represent good value for money. This can be especially hard to do, since the benefits of financial advice may take several years (or even longer) to materialise.

Yet the underlying principle of financial advice is simple: you pay a cost up front (the adviser’s fee) on the basis that you’ll probably gain more money in the long term.  This bears out in practice: studies have repeatedly shown that on average, those who take advice end up substantially better off than those who do not.

So how does the cost of advice compare with the cost of no advice?

Taking advice vs no advice at all

Imagine two friends, Julia and Gavin. Both are well-educated and from affluent backgrounds, but Julia feels less financially confident and so prefers to ask an independent financial adviser (IFA). Gavin, on the other hand, feels very sure of his own financial judgement.

Financial independence

We first meet Julia and Gavin at university. Both start in rented accommodation, but Julia’s father talks to the family IFA and decides that buying a flat would be better long-term value. Julia’s father has to pay the deposit and guarantee the mortgage, but Julia ends up paying less per month than Gavin, and when she graduates she has a share of a valuable asset when the flat is sold.

Starting a pension and buying a home

Both Gavin and Julia get first jobs with good employer benefits, and both sign up to the pension scheme.  But Julia talks to the family adviser and also joins the company share scheme. It costs her more in the short term, but after three years Julia cashes this in and puts it towards the deposit on her first proper home (Gavin, meanwhile, is still renting).

Making investments

Both Julia and Gavin earn enough to be able to make investments. But while Gavin considers the 1.5% annual fees on his investment funds to be reasonable, Julia again seeks whole-of-market financial advice and finds a fund charging only 0.5%. Over the years this adds up to thousands of pounds of difference between the two.

Julia also makes sure her pensions and investments are in specially selected funds, rather than the default medium-risk fund that Gavin’s are put into. Although these fluctuate more, Julia can move them into safer investments as she gets older and more risk-averse. Again, Julia should end up thousands of pounds better off.

Managing risk

Gavin meanwhile spots what appears to be a golden investment opportunity with a hedge fund. Julia hears about this too, but her financial adviser looks into it and finds areas of concern. Reluctantly, Julia sticks with her ‘boring’ stocks & shares ISA, but finds to her surprise that she still makes more than Gavin when the hedge fund’s manager leaves and its performance slumps.

Planning for retirement

Eventually both friends are approaching retirement. Gavin tries to make do with just the government’s free guidance about his pension options, but they don’t tell him which would be best in his particular circumstances. In the end Gavin opts for the traditional lump sum and annuity, because it’s the easiest option without an adviser. Julia, by contrast, started seeking advice some fifteen years before her planned retirement date, and has already taken steps to boost her pension (such as transferring other investments into it). Julia ends up with a substantially higher income in retirement, and also chooses options that allow any unspent pension to pass on to her family when she dies.

How much value can financial advice deliver?

The monetary return on financial advice will vary from person to person and according to circumstances, so it’s impossible to give an overall estimate. However, you can get a good idea of it by looking at just one area – pension saving.

According to the Value of Advice report1 by Unbiased, people who take advice save an average £71 more per month than those who do not, regardless of how much they earn. At basic rate tax relief, this translates to an extra £88.85 going into the pension pot. Over just 20 years at 4 per cent growth, this would provide an extra £32,660 in the pension, as shown here:


Cost of advice

Extra monthly contribution

Tax relief added

Amount saved over 20 years

No advice

















Total positive value of advice:


*In the case of the individual who takes no advice, this figure is the amount of extra spending money this person will have over the 20 years.

** Estimate. Actual costs of advice may vary.

The additional cost of no advice

As we can see, advice taken at the right time can save many thousands of pounds over the long term, even taking into account the cost of the advice. But in the example above, what is the cost to Gavin of not seeking advice? Gavin ended up spending many hours of his time trying to decide what to do, and whenever he made a decision he couldn’t be sure it was the best for him. His choices were also less disciplined, and tended to be reactive rather than planned. Furthermore, they didn’t take proper account of his risk tolerance and how this changed over time. In short, his strategy was to wing it.

All forms of investment carry an element of chance, but it’s clear that Gavin’s exposure to chance was far greater than Julia’s. In the end, Gavin’s decision not to take advice cost him more than the money he didn’t gain – it cost him peace of mind too.

Find out more about the value of advice here.

Unbiased Value of Advice research 2015

Nick Green is communications manager at Unbiased, the UK's favourite place to find advice you can trust. He has been writing professionally on finance, business and many other topics for over 15 years.


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