Aegon wellbeing report highlights money mindset as an opportunity for advisers

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  • People with an adviser are four times more likely than those without one to have high levels of financial wellbeing

Major new study from pensions and investment company Aegon UK identifies the impact of financial advice on financial wellbeing. It also highlights the opportunity for advisers to improve their clients’ financial wellbeing by addressing their money mindset, rather than just their money.

The report reveals that just 10% of people who have never had any financial advice are fortunate to combine healthy finances and a positive money mindset, compared to 44% of those who have an ongoing relationship with a financial adviser and 23% who have occasionally used a financial adviser.

However, the report also highlights that the positive correlation between advice and financial wellbeing stems mainly from advisers helping their clients accumulate wealth; not necessarily because they make them happier. Those with a financial adviser were more likely to have high levels of wealth (e.g. through income, property or investment returns). But they were not always more likely to know what gives them joy and purpose in life or have a concrete and meaningful connection to their future / future selves.

This indicates that advised clients have more wealth, but they’re not necessarily likely to know what makes them happy which implies they are more focused on accumulating wealth for the sake of having more money; but not necessarily more happiness. This highlights an opportunity for financial advisers to future-proof their relationships with clients by influencing their financial wellbeing on a deeper level.

Advised clients report healthy finances

The report found that the average advised client reported nearly three times as much in pension savings at £246,000 compared to £95,000 for non- advised people. This pattern was repeated across a range of metrics with advised clients reporting total non-pension savings of £65,000 versus £32,000, and lower unsecured debt at £3,700 versus £6,400.

Advised clients not significantly better on mindset factors

However, when it came to mindset factors the gap narrowed. 22% of people with a financial adviser have only a vague sense of what gives them joy or purpose, despite this being a significant factor in influencing how people should think about prioritising their finances. This was better than the non-advised population (32%), but not significantly so.

Only 9% of those without an adviser have a financial plan that stretches over at least 10 years compared to 34% of those with and adviser.

While around three-quarters of those with an adviser agreed they had a financial plan, only 44% said they had a concrete picture of their future self (in ten years’ time), compared to 29% of the population as a whole.

Similarly, 11% of advised clients say that they frequently compare their finances to those who are better off than they are versus 17% of non-advised. This highlights that despite their relative wealth, many often feel dissatisfied with it or don’t have perspective on how well they are actually doing. This is significant as upward social comparisons (keeping up with the Jones’) are proven to negatively impact someone’s financial wellbeing.

Overall, the report highlights that there are benefits of getting financial advice to improve both the money and mindset sides of financial wellbeing. However, the real opportunities for advisers to improve the financial wellbeing of their clients lie in the areas relating to mindset.

Ronnie Taylor, Chief Distribution Officer at Aegon comments:

“Financial advice and financial planning in the UK is evolving at speed. There’s a growing movement towards looking at issues beyond building wealth.

“Behaviours, feelings and attitudes are gradually becoming more central to financial planning and advice. This approach doesn’t start with the money, it starts with the vision. The hopes, anxieties, relationships, influences alongside attitudes to life, family and work are all core to the financial wellbeing of a client and should be given as much attention than the amount of investible assets. Planning a financial future based on a client’s purpose as well as their financial needs is likely to lead to better financial wellbeing for both the client and your business.

“Insight like this can deliver a more fulfilling client experience with better outcomes for clients and long-term, valuable client relationships for advisers.

“And while we recognise that affordability is a common challenge for people seeking financial advice, it’s not the case for all financial advice. Protection is an example. For someone who likes to feel safe and wants to be prepared for all life can throw at them, the financial safety net protection provides could be a real boost to their financial wellbeing. And a client sharing sensitive information about their health worries and experiences is a firm foundation to build a long-term client relationship.”

Chris Budd, Chair of the Initiative for Financial Wellbeing (IFW) said:

“Advisers and financial planners have a fantastic opportunity to combine happiness and fulfilment with wealth. If advisers were to integrate some focus on the mindset factors identified in Aegon’s Financial Wellbeing Index, they could influence and improve the overall financial wellbeing of their clients.

“It’s not something that will happen overnight, but by applying financial wellbeing theory to the advice process you can slow down the traditional solution driven approach to gain a true understanding of the money motivations of your clients for the best outcomes in terms of happiness and not just wealth.

“Whether encouraging clients to visualise their future self, or paying more attention to the experiences that give a client moments of joy and purpose and their attitude to financial plans, incorporating financial wellbeing practice into your financial planning and advice services is a sure way of strengthening your client/adviser relationship and future proofing your business.”

 

5 things to consider to improve client financial wellbeing and future proof your business

Find out what makes your clients truly happy?

Encourage clients to think about the experiences that gives them joy and purpose, in the past, now and in the future.

Have your clients got a clear image of what their future self is like?

Help them picture a concrete idea of their future self so they have something to visualise and aim for. Not just a number on a pension statement or bank balance.

Who do your clients measure themselves against?

Discourage upward social comparisons and encourage clients to compare themselves to more realistic and healthy financial role models.

Do your clients have a long-term plan that reflects their purpose and their future self?

Create financial plans with your client’s ambitions for joy, purpose, and future self in mind.

Build relationships with your client’s children or wider family

You will get insight into their relationships with money and their level of financial education. Get them thinking about their purpose and future self from a young age and you will be more likely to keep them as a client, future proofing your business.

 

Aegon’s Financial Wellbeing Index

Aegon’s Financial Wellbeing Index analyses financial wellbeing across the UK assessing both peoples’ financial position and their money mindset. Based on data from 10,000 respondents and more than 1.3 million data points, Aegon’s Financial Wellbeing Index places a greater focus on long-term financial matters than previous studies in this area.

The index is comprised of 5 sections on money and 5 sections on mindset. In each section respondents were asked a series of questions, the answers to which gave them a possible score of 0-10. In total there were 100 points available and each section was given an equal weighting. Where people lived and the average earnings in their area were taken into account to adjust for regional disparities in earnings and to enable Aegon to draw conclusions about the wellbeing of people in different locations.

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References

* The Financial Wellbeing Index was based on a representative survey of 10,000 people across a range of sectors, company sizes and job roles, carried out by Aegon UK.

 

Further information

Stephanie Melrose

PR Manager

Aegon UK

stephanie.melrose@aegon.co.uk

Mob: 07740897621

 

Notes to Editors

  • In the UK, Aegon offers retirement, workplace savings and protection solutions to over three million customers. Aegon employs around 2000 people in the UK and together with a further 800 people employed by Atos, we serve the needs of our customers. More information: www.aegon.co.uk
  • Aegon’s roots go back more than 175 years – to the first half of the nineteenth century. Since then, Aegon has grown into an international company, with businesses in the Americas, Europe and Asia. Today, Aegon is one of the world’s leading financial services organisations, providing life insurance, pensions and asset management. Aegon’s purpose is to help people achieve a lifetime of financial security. More information on www.aegon.com
  • Figures correct as of January 2021.