Are Australians really better off with financial advice?

With Australians grappling with the rising cost of living, many are experiencing money stress, impacting not only their financial wellbeing but their health and relationships.

However, new research has revealed that working with a financial adviser can drastically improve one's quality of life.

But if that's the case, why is hardly anyone using them?

According to the Value of Advice study by Financial Advice Association Australia (FAAA), an industry body for financial planners, over four in five of those using a financial adviser are confident of solving most challenges.

Some 80% are less worried about money since receiving financial advice, 83% feel they cope better when faced with health issues, and 49% say financial advice has positively impacted their family life.

David Sharpe, chair of the FAAA, says the results show measurable differences between those who navigate their financial journey alone and those who work with a professional financial adviser.

"It is well understood that financial wellbeing is connected with overall health and wellbeing," he says.

How wellbeing and financial advice are linked

This connection was displayed by the FAAA's Value of Advice Index, which compared three groups: those who don't use an adviser, those that do, and those who work with a professional who has a Certified Financial Planner (CFP) qualification - a professional standard for financial planners.

The responses were measured across four key metrics - quality of life, financial confidence, financial satisfaction, and their experience with their adviser.

What it found was that those that use a financial adviser were significantly better off than those that don't, while CFP professionals were more influential than advisers without the qualification.

Clearly, the benefit from advice is there.

However, AMP's latest Financial Wellness report found only one in 20 are seeking help from a financial adviser. So, where's the disconnect?

Can a financial adviser really help?

Part of the problem is the damage that's been done to the financial advice industry - some of it self-inflicted. However, there are also many misconceptions about what financial advisers do and who it's for.

Sharpe says the study busted several myths. Firstly, that financial advice is only for the rich.

"The study shows that nine in 10 clients earning $120,000 or less per year who work with financial advisers feel financially secure which is higher than unadvised consumers on the same level of income," he says.

Another one is that financial advisers lack objectivity.

Many who are stressed often turn to trusted friends and family members before approaching an adviser.

Yet the FAAA study found more than nine in 10 clients of financial advisers report they trust their financial adviser to act in their best interests.

One popular misconception, says Sharpe, is that the cost of financial advice is more than it is worth.  But again, nine in 10 clients say the benefits outweigh the costs.

"We hope more Australians will recognise the value that financial advice can bring to them, in helping them manage their financial situation and provide peace of mind," he says.

Financial advice across the generations

Another common myth is that financial advice is only for older Australians approaching retirement. While it's generally a good idea that retirees do engage an adviser, advice is often invaluable through one's life.

Significantly, the improvement in the Value of Advice Index remained across generations, with advised Gen Y, Gen X, and Baby Boomer clients all reporting better quality of life, financial confidence, and financial satisfaction, when compared to non-advised Australians.

Unsurprisingly, there are age-based differences in the way Australians want advice to be delivered.

For example, Gen Y are more likely to expect digital engagement from their adviser than Baby Boomers.

Gen Y are also seeking education as well as advice. Those with an adviser are significantly more likely than older generations to describe the advice relationship as a form of self-improvement.

A flexible experience including a mix of digital and in-person interaction is twice as likely to be important to Gen Y than older generations, the study found.

The bottom line

When asked how a financial adviser helped them, the top three survey responses were:

• building a realistic plan for a comfortable retirement 
• help to get the most out of a current financial situation 
• reducing financial stress and worries.

At a time when interest rates are soaring and bills are flooding in, when all the myths are dispelled, who wouldn't want that?

Get stories like this in our newsletters.