What Is The Difference Between Financial Planning And Financial Advice?
On the face of it, these terms look quite similar. Indeed, many people use them interchangeably. However, we believe there are several crucial differences between the two and that they are fundamentally different services. It can be worth knowing the difference so you can find the right service for your requirements and the right company for you.
What Is Financial Advice?
Financial advice is a service which addresses a particular problem or set of problems. It is often, but not necessarily, linked to a financial product.
For example, you might want advice on how much life insurance you need and what would be the best product to take out. It might be advice on your pension e.g. how best to withdraw money in retirement.
Financial advice can be either a one-off transaction or on ongoing service. Where advice is given relating to investing assets, it is more likely to be an ongoing service with regular reviews. Financial advisers can also be either independent or tied to a particular company and selling their products.
What Is Financial Planning?
Financial planning starts with you, your objectives and ambitions and what you want your life to look like now and in the future. It then looks at all of your financial resources (and commitments) and how these can be best deployed to achieve what is important to you.
All good financial plans should have a Financial Forecast / Cashflow Model at their core which aims to map out your financial future, showing what can be achieved and how to get there. It can also demonstrate the impact of different decisions or events in your life.
Good financial planning should be an ongoing process. Things will change over the years, both those inside and outside of your control and financial plans should be adjusted to ensure you keep on track to achieve your goals.
Financial planning can incorporate advice on specific issues and the arrangements of products where necessary, but it is part of the bigger picture, a means of effectively implementing your financial plans.
Why This Is Important
Financial planning typically answers a bigger question than financial advice. Financial planning looks at your whole financial life, rather than deal with a specific issue in isolation. You may well only want advice on that one issue, however, do keep in mind you won’t know what opportunities are potentially being missed. Financial planning can also help instil habits and ways of thinking that can benefit you for decades.
Financial planning also requires a different skill set than financial advising. Not every financial adviser is able to produce a financial plan. The highest standard of financial planning qualification is the Certified Financial Planner TM (CFPTM) designation. The CFPTM is an international qualification, recognised globally as the gold standard in financial planning. In the UK the CFPTM qualification is issued by the Chartered Institute of Securities and Investments (CISI).
Collingbourne’s Approach
Financial Planning is at the centre of virtually everything we do; it is the context through which all decisions are made. We firmly believe that the best outcomes are unlikely to happen by chance and planning for the future helps deliver better outcomes for our clients.
Our financial planning illustrates the effect of various decisions / actions and provides graphical and insightful visualisations of these impacts over time. We transform our client’s perspectives, giving an alternative way of seeing the world and to see clearly new possibilities for the future.
Image Source: Unsplash
Categories / Topics
Latest / Recent posts