Put simply, yes – there are many!
But why is this even relevant? Surely you would think that you will end up roughly in the same place whether you are working with a ‘financial adviser’ or a ‘financial planner’?
Well, this question was recently validated during a meeting of our client advisory group, where one of our newest clients stated: “what people like me need is a financial planner – not a financial adviser”. Another member of our group confirmed that it is about “plan over product”.
His past experience of working with a financial adviser had been all about the sale of products and an interest in his money, whereas his experience of working with us as financial planners has been all about creating plans and a real interest in his life.
Everyone in our group made it abundantly clear that they needed to work with someone who was interested in them, their families, and their lives – not their money!
Advice and planning are two different professional services that, from the outside looking in, seem one and the same. They are both highly regulated and require a level of technical knowledge and expertise. Both services are sought out typically by people looking for solutions to problems concerning investments, pensions, inheritance, and retirement.
What is financial advice?
Financial advice is a transaction. Here, an adviser provides a product recommendation based on the needs and objectives of a customer. That could be anything from taking out a mortgage, life insurance, investing a lump sum, or saving for your financial future via a pension or ISA.
It means that your objectives are the starting point of most financial advice. It will provide solutions to more straightforward questions such as: What do you need? What do you want? How much can you afford?
It is a functional transactional service designed to solve simple problems. However, it is worth saying that financial advice is an extremely valuable service for many people.
What is financial planning?
Financial planning is not about a transaction because it must start with you and your life, hopes, dreams, fears and aspirations. The foundation of any meaningful financial planning must be based on what matters most to you.
Financial Planning is a process that, in short, starts with LIFE, moves into PLANNING, and ends with ADVICE. In our opinion it is almost impossible to deliver any type of meaningful advice if we first don’t understand your life and create bespoke plans to help achieve your objectives. The advice that comes thereafter is designed to enable these goals.
The three-dimensional process of financial planning
This is a broad topic and not everyone is comfortable talking about their lives in-depth in a first meeting. But, if you are going to entrust your life savings to an individual or business, they need to know what matters most to you. It won’t be your pension or investment portfolio, but it will probably be your family, travel, a hobby, giving back, or something else.
This is the point that you will know if you are going to be getting transactional financial advice or more in-depth financial planning.
If the conversation at your first meeting is more about your money than you and your family, you know that you will be getting financial advice.
“Failing to plan is planning to fail”. Most people know this saying but very few have a personalised financial plan – something that gives them a view into their potential future.
Cashflow forecasting is a tool that enables a financial planner to produce a personalised financial forecast. This isn’t a crystal ball and is not an attempt to predict an unknowable future. It’s about looking forward based on where you are now and where you are trying to get based on a set of prudent and reasonable assumptions.
This process enables both you and the planner to create different ‘what-if?’ scenarios. This planning stage is vitally important as the discussions held during this time enable the creation of a plan that is based on the things that matter most.
This plan will need to be reviewed, monitored, and adapted. This is why financial planning is an ongoing process, not a one-off transaction.
At this point, a financial planner would have spent many hours with you learning about your life and what is most important to you and your family.
You would have had two or three separate meetings, reviewing, amending, and adapting a financial plan that includes detailed cashflow planning. The planner would have introduced you to their investment philosophy and beliefs which should be based on empirical evidence.
They may have also shared their ‘why’ (purpose) and that of the business. As financial planning is an ongoing process, the relationship you and your family will have with your financial planner will be decades long and multi-generational.
Now, we are all in a great position to act and implement any financial advice needed to enable you to achieve those things that are most important, based on your financial plan.
LIFE > PLAN > ADVICE
There are many people purporting to be ‘financial planners’, as it is the buzz phrase in our profession right now. But, the simplest way to tell if someone is providing a financial planning service is whether you feel as though they are interested in you or your money.
Have they asked you any questions about you and your life? Do they really listen? Do they take an interest in how hard you have worked to accumulate the pot of money they are so desperate to manage on your behalf? Do they actually know what matters most to you?
Or is it all about products, value propositions and portfolio management?
Why does it matter?
It matters because financial planning done properly has the power to change your life.
But I don’t believe many people know the difference between financial advice and financial planning, and that there is another way.
Financial advice is still part of a transactional and sales-led industry whilst financial planning is part of a growing profession that truly puts the client’s interests first:
- A long-term relationship with a trusted adviser who will take the time to understand what is most important to you
- Someone who will create, review and amend a visual plan whilst making sure you do those things on your list
- Giving you back time, providing true peace of mind, and offering a sounding board to listen, challenge, guide and advise you and your family.
Take the time to find a financial planner and experience REAL financial planning. Email firstname.lastname@example.org or call us on 01621 851563.