When you need expert help in making sense of your finances, who do you turn to – a financial adviser or a financial planner? Aren’t they the same thing? Not quite.
Some advisers may call themselves financial planners, and while the terms are often used interchangeably, they’re really not the same. When you’re looking for guidance, it’s important to understand the differences and know what you’re getting for your time and money.
Let’s start with some similarities
Financial advisers and planners both look at a person’s situation, needs and resources to structure their finances in a way that’s suitable for them. They’ll share some of the same processes and tools, and both should put the client’s needs and interests first. And in the UK, both sets of professionals are regulated by the same industry watchdog, the Financial Conduct Authority (FCA), offering reassurance that they’re bound by certain standards.
But here’s where the two start to diverge.
What are they looking at? Focus and scope
Generally, financial advice is about addressing a single need, such as investing a lump sum or setting up a pension. While a good adviser will make sure the solution is a good fit for that need, the scope of consideration usually stops there.
In looking at a client’s solution in isolation, an adviser may not pick up any problems their plan may cause in another area, or even understand why it was needed in the first place. Investing in a certain way, for example, could bring more of your estate into the inheritance tax net, have a knock-on effect on your other tax liabilities or tie up your money at a time when you need to access it.
In contrast, financial planning looks at the bigger picture. Rather than having a narrow objective, it considers your life and overall wellbeing – not just financial – to understand the best way of crafting the future you want for you and your family. When it comes to questions asked, instead of focusing on something like ‘How do I invest?’, it will centre around ‘What do I want?’ and other questions to define your goals before the number crunching begins.
How are they doing it? Process and outcome
With financial advice, the outcome is usually a financial product, such as an investment fund or a pension. While they should still have your best interests in mind, an adviser will usually receive commission or other benefits for recommending certain products. Here’s your solution, thanks and good luck with everything.
Instead of being transactional, the relationship you have with a financial planner is much more personal and long term. Putting your needs and goals at the centre, financial planning can only begin by getting to know you. This includes a number of steps, asking questions to examine where you are, what you want, what you have and where you want to get to. Most financial planners will also calculate when you will reach financial independence and whether your money is going to run out, and in doing so gauge how realistic your objectives are.
While this can all be a challenging process, it’s also empowering, helping to pinpoint what’s important to you and giving you the confidence and control to protect and add value to your future.
What you’ll end up with is a detailed financial plan – a blueprint for achieving your goals, now and over the long term. Your planner will then implement the strategy that works for you, and meet with you regularly to make sure it stays on track as your life evolves.
What’s right for you?
Of course, both financial advice and financial planning can add real value, and there’s often an overlap between the two, depending on the provider.
For our money, we’re financial planning all the way. We may be biased, but we believe financial planning offers the best framework for creating the life you want.
Think of it as a sketch versus a painting. If you just want the basics and to meet a particular financial need, then an adviser will do the job. But if you want to see the complete picture and achieve a life full of colour, for you and your family, speak to a financial planner. They’ll go beyond the brushstrokes to make sure you’re on the right track to meet your goals, today and tomorrow.
At Citywide, we’ve gone a step further by becoming a firm accredited by industry body, the Chartered Institute for Securities and Investments (CISI). This shows that we meet the highest standards of professional excellence and integrity as financial planners.
Contact us to get started on your financial plan by giving us a call on 01372 365950.