The Cost of Bad Advice: Taking advice solely from family and friends can leave people £42,000 worse off on average

• Those who are proactive in seeking advice and guidance from multiple sources were found to be better off.
• Moneybox highlights how targeted support could be the catalyst needed to boost financial confidence and help people make more informed financial decisions.

• Moneybox’s analysis has found that people who solely rely on their family and friends for financial advice are on average £42,000 worse off – regardless of income.
• Close to a third (29%) of Britons learned how to manage their finances and plan for the future through their parents, and a further 11% rely on their friends for advice. With many family members and friends receiving similar levels of financial education, this could lead to bad advice being passed on, impacting overall financial health and future prospects.
• Almost half (47%) have learned via freely available financial information online which includes personal finance websites, articles, and content creators.
• Those using paid financial advisers, though a small proportion of the UK population (less than 8%), had a higher net worth (around £68,000 more) than those that didn’t – regardless of their income.
• However, those who used multiple sources spanning everything from online resources to family and paid financial advisers benefited the most. This showcases just how important it is for people to be engaged with their finances whether that means taking the time to learn, keeping up to date on any industry news and market changes, or speaking openly about personal finance topics.
• The most common sources people are using to educate themselves on money management and planning for the future include financial advice websites (28%), work (16%), partners & spouses (14%), financial advisors (14%), and friends (11%).

Brian Byrnes, Head of Personal Finance at Moneybox: “Financial education, both in school and in later life, has been severely lacking in the UK which means that most people have been left to figure out how to manage their money and plan for the future through trial and error. Needless to say, this system is far from ideal and has contributed to persistently low levels of financial resilience among the general population and fuelled social issues such as the looming pensions gap and an ever-widening wealth gap.

“While it’s completely natural to turn to those we are closest to when we need advice or support, the truth is, not all knowledge is equal. Remember that if you rely solely on friends and family for financial advice, you may be taking on board advice that is outdated or misinformed, as they themselves may have followed a similar path due to the lack of financial education on offer. This can easily lead to missed opportunities and financial mistakes being made.

“We often underestimate just how important the financial habits we build and embed in our day-to-day lives will have on our financial opportunities in life. Good or bad, they can very quickly snowball into long-term benefits or consequences, so it’s important to do all you can to inform yourself from various trusted sources.

“Financial advice remains quite inaccessible right now but there are many other freely available expert sources of financial information that can be invaluable in helping boost knowledge and build financial confidence. And as our findings prove, the more sources of financial information you engage with, the better off you could be.

“A growing source of influence in personal finance education in recent years has been social media  ‘finfluencers’ who have built online communities helping to educate people on critical money matters. Our research has shown that many people still struggle to understand personal finance jargon (16%) and find learning about personal finance topics overwhelming (17%). ‘Finfleuncers’ alongside established personal finance bloggers and fintech providers like Moneybox, have placed huge emphasis on making personal finance topics accessible, and keeping their communities updated on relevant news or market changes that may affect them.

“While there has (rightly) been much focus on the lack of sufficient regulation around financial promotions in this space, I often think that ‘finfluencers’ do not get the credit they deserve for the role they have played in helping encourage more people to engage with learning about financial topics more regularly. Now that regulation is catching up in this space, ‘finfluencers’ and content creators across the industry will be better supported to guide their audiences with greater clarity.

“Looking to the future, it’s imperative that the industry does more to close the financial advice gap. At Moneybox, we’re passionate advocates for the proposals put forward within the Advice Guidance Boundary Review (AGBR) and believe they have the potential to revolutionise consumer finances. Targeted support, in particular, will empower financial service providers to offer more guidance that is relevant to our customers’ circumstances, helping them to better understand their finances and make more informed decisions with greater confidence. This is a vital step in closing the knowledge and financial confidence gap and ensuring that people feel empowered to take control of their finances supported by trusted providers who can better tailor information and education to customers needs.”