Advisor vs Planner

June Blog – What is the difference between financial advice and financial planning?

Written by Mary Green

This profession can be tricky to navigate as a customer. Whilst we strive to de-bunk all the goobledeygook that comes with financial services for our clients, we know that it can still be confusing sometimes, so today I thought I’d cover off the important differences between Financial Advisers and Financial Planners.  

It’s important to understand that:

All Financial Planners are Financial Advisers

But not all Financial Advisers are Financial Planners

Does that help? Probably not! Let me expand a little bit more. Both Financial Advisers and Financial Planners are trained and qualified in ‘traditional’ financial advice, and this is the stuff you would expect to be talking about with us.

Traditional Financial Advice

This focuses on products, for example if you want someone who will just look at your pension or at a lump sum available for investment, this is your first point of call. Financial Advisers tends to focus on an acute ‘problem’ that needs a solution.

For example, you may want advice on how best to invest a lump sum for the long term. A financial advisor will consider the options, the tax position and recommend the best investment strategy for you as an individual.

What a Financial Adviser won’t do, is consider the bigger picture of this investment. What do we need this investment to do in the longer term, what rate of return is needed to get you to where you want to be. How does this investment fit alongside your other financial arrangements?

Financial advisers are useful, but they don’t tend to answer the big questions. Things like “will I be okay”, “when can I afford to retire” and “what kind of lifestyle can I afford in retirement?“.

The biggest problem with financial advice is the focus on financial products. Many advisers only get paid if they recommend new products, whether that’s an ISA, a pension, or some other investment and tend to work on a percentage-based model. Typically, they will charge you 2 – 3% of your investments. So if you were investing £100,000, they may charge between £2,000-£3,000 for the advice they give.

Modern Financial Planning –

Remember, all Financial Planners are qualified Financial Advisers. This means, we can still do all the traditional stuff when we need to, if you need tax planning, investment strategies, new products arranged, we absolutely can do that. But the key difference is that, this is not our starting point, or the main service we offer.

An independent financial planner will look at the ‘big picture’ of your finances, taking a holistic approach to financial planning. A financial planner will help you work out what you want from life and then create a financial plan around these wants. I mentioned before that Financial Advice is not our starting point. Instead, our is ‘what if we change nothing here? If we do nothing, how do your finances align with what you want from life?’ Only when we understand where you already are, do we start to consider what else we need to do.

In summary, the main difference between a financial planner and a financial adviser is that a financial planner focuses on you and your goals, whereas a financial adviser focuses on your money and your investments. Financial planners use their expertise in taxes, budgeting, pensions, and investments to create an overarching strategy for your finances.

Working with an independent financial planner puts you in control of your finances, providing you with clarity and confidence in your financial future. A financial planner will create a financial plan, which provides a roadmap for your financial future. The financial plan will show you where you are today, where you want to be and then create a strategy to help you get there. The financial strategy may include financial products, such as an ISA or a pension, however, these are simply tools to get the job done.

Most independent financial planners work on a fixed fee. The exact cost will vary, depending on how complex your circumstances are. For reference, our fees tend to be between £1,000 – £3,000. This will cover the initial design and build of your financial plan, as well as implementing any recommendations that follow. 

In summary

Of course, we are bias but we think, hiring a financial planner is always better value for money. This is because by working with a financial planner, you will receive a full review of all areas of your finances. In addition to receiving a personalised financial plan, you will receive a full review of your tax position, pensions and investments and advice on how these can be improved.

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