IFAs could play a key role in helping reduce UK debt, according to new research commissioned by AIFA.
The study estimates credit card balances could be cut to £800 from £1900 without advice. This figure applies to low to medium income populations within four years of receiving financial advice and allowing for the fact one in 10 act on the guidance. Overall credit card debt would fall from £2.5bn to £830m.
In other areas, IFAs will play an important role in increasing savings, according to the “Financial Advice: Worth the Money?” report compiled by NMG Financial Services.
It estimates that under the conditions outlined above, pension contributions would increase by £560m when advice is given. Meanwhile, annuity premiums would go up by £58m (but would rise by £300m by 2060 as more people retire with larger pensions pots).
New contributions to medium term savings plans would increase by £1.5bn net, the study forecasts.
Advisers are also needed to help reduce the protection gap which has reached £52 000 for the typical household in the event of unforeseen unemployment or critical illness.
Chris Cummings, director general of AIFA comments: “At the moment, IFAs tend to be used for pensions and investments. But given the impact that professional advisers can have on consumers’ wealth, we’re calling on consumers to use financial advisers for all their financial needs including health protection, debt reduction and savings.
“It should be remembered that approximately one-third of consumers who receive advice from IFAs then take positive action to improve their financial situations without purchasing a product.”IFAonline
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