How financial advice can reduce stress and save time

In a recently published research paper, The Emotional and Time Value of Advice, Vanguard Investment Strategy Group’s Paulo Costa, Marsella Martino, and Malena de la Fuente delve into the emotional and time-saving benefits that investors can gain from professional financial advice. In general, advised clients report getting emotional value as well as spending less time thinking about and dealing with their finances.

For plan sponsors offering advice in their plan, these benefits can translate into reduced workplace distractions, improved employee well-being, and measurable productivity gains.

To explore these results, the paper’s authors surveyed 12,443 Vanguard investors, of whom 62% were also advised by Vanguard. The survey provided valuable insights into how financial advice affects clients’ emotional well-being and productivity. Respondents answered questions about their emotions and perceptions regarding their finances, the time they spend managing their finances, and their overall perceptions of financial advice and their well-being.

“Rather than just look at existing data, we conducted a survey, because the perception of emotion is what really matters,” de la Fuente said. “It’s about really getting into investors’ minds.”

The survey results highlight a significant perceived emotional benefit for advised investors. According to the findings, advised investors are roughly half as likely to experience high levels of financial stress compared with self-directed clients (14% versus 27%). In addition, 86% of clients using either digital or human advisors report having more peace of mind. This figure rises to 88% for those with a human advisor, but even clients using digital advice benefited, with 69% reporting increased peace of mind.

Advised clients, whether they work with human advisors or are digitally advised, also reported substantial improvement in their emotional state. They experienced an increase in positive emotions such as confidence and security and a decrease in negative emotions such as anxiety, worry, sadness, disappointment, and feelings of being overwhelmed (Figure 1).

“Human-advised clients are more likely to report improvements in their emotions, consistent with previous research,” Costa said. “What’s somewhat surprising is how digital advice does well in helping clients not feel anxious or ashamed when interacting with the service. For example, 85% of digitally advised clients report not feeling ashamed when using digital advice.” 

The survey reveals that, on average, Vanguard investors spend 4.3 hours per week managing their finances. Advised investors spend significantly less time—3.8 hours per week—compared with self-directed investors, who spend 5.5 hours per week. About 76% of advised clients reported that advice saves them time, with median time savings of approximately two hours per week, or more than 100 hours per year. These time savings are even more pronounced for human-advised clients compared with digitally advised clients (Figure 2).

The time saved is not just a personal benefit; it also has implications for the workplace. Workers in employer plans reported spending an average of 3.8 hours per week distracted at work by financial stress, leading to an average yearly productivity loss for employers of $6,362 per employee. Advised clients, on the other hand, are less distracted. On average, advice reduces distractions by almost two hours per week, translating into potential yearly productivity savings of an average of $4,026 per employee (Figure 3). Given that workplace digital advice costs 0.15% per year (or an average of $642 per year for the clients surveyed), it presents a highly cost-effective outcome for employers.*