If you’ve ever looked into soliciting the help of a financial planner, you’ve probably come across the concept of a financial advisor too. You could be forgiven for mistaking one for the other, but in fact they are very different roles.

The Institute of Financial Planning – the IFP, which merged with the Chartered Institute for Securities & Investment (CISI) in late 2016 – succinctly describes financial planning as:

‘An ongoing process to help you make sensible decisions about money that can help you achieve your goals in life; it’s not just about buying products like a pension or an ISA.

 

‘It might involve putting appropriate wills in place to protect your family; thinking about how your family will manage without your income should you fall ill or die prematurely, spending money differently, but it involves thinking about all of these things together, i.e. your plan’.

 

Financial Planner or Financial Adviser?

Many in the UK will use these terms interchangeably. To a large degree, the professional bodies and regulators themselves have often confused the phrases, definitions and terminology. This does nothing to help consumers. For us, the roles are totally separate. Some would even say poles apart; they are different disciplines requiring different skill sets and approaches. 

 

A proper Financial Planner will build their business model around the understanding that:

1. Selling or arranging financial products has nothing at all to do with True Lifestyle Financial Planning.

 

2. The planning comes first. Financial products are very important and are usually part of the mix, but they should come at the end of and as a consequence of the Financial Planning process; financial products should not be an end in themselves. 

 

3. Financial Planning cannot be undertaken without the production of a fully personalised Cash Flow modelling exercise.

 

4. There are far more important things in life than money. A true Financial Planner will take the time to listen and to establish what is really important to you.

 

5. Their fees should in no way be reliant on the sale of financial products. A True Financial Planner will be remunerated for the planning work irrespective of and independently of any financial products. It is only in this way that I believe that a Planner can demonstrate and evidence that they are truly putting their Clients interest above all else. 

 

6. True Financial Planners tend to work with a limited number of Clients. Their work is often very detailed, time-consuming and impactful. Because of this, they restrict very tightly the number of new Clients they take on in any given period. 

 

Financial Advisers (Advisors) will build their business model around:

1. The sale of and arrangement of Financial Products such as ISAs, Pensions, Life Assurance etc. They will tend to be remunerated only on the sale or arrangement of such products. Before commission was banned on investment products in 2013, they would have worked on a commission basis.

 

2. Any planning that Financial Advisers undertake, whether they class themselves as independent or not, will tend to be limited in scope. It is unlikely to involve comprehensive Cash Flow modelling and is likely to be product- rather than person- and objective-led.

 

3. Financial Advisers tend to spend less time overall with their Clients. They often need to constantly attract new Clients to sell more products too. The ongoing work and support they provide may well be limited in scope and may just involve the review of annual investment performance. 

 

Which one is right for me?

For some, a Financial Adviser is all they need. Once you have the planning done yourself, go find a Financial Adviser to help you put it into place, or look at the host of new DIY services that are springing up and buy your own financial products online.

For natural delegators or those that are seeking a more comprehensive approach and are looking for a deeper, more meaningful, trusted and long lasting relationship, I recommend speaking with a True Lifestyle Financial Planner. 

Financial products are very important but they are only part of the story, and indeed they come at the end of the process and not the beginning. What is the point of owning investments, pensions and the like without knowing what they are for or what they can achieve or indeed why you have them? People often accumulate financial products throughout their lifetime without ever really knowing why – it is usually because someone sold them to them.

 

Why create a Financial Plan?

A Financial Plan will help you to live life with purpose. It should inform, motivate and inspire you. Your plan should provide you with clarity and confidence in your financial decisions and the actions required to live the life you want. It is not a boring static document. It should be an evolving, almost living and breathing entity that moves with you; should adjust to life’s ups and downs and always provide you with guidance and a reference point on the actions that need to be taken.

Having said all that, ultimately it is not about the plan; it is about you and what you want out of life. The plan provides the blueprint that will help give you clarity on what can be achieved, in what time frame and how.

 

Where do I start?

If I asked you right now what do you want from your life, what would your immediate answer be? A sports car? To travel the world? To retire or, perhaps, to leave a legacy?

All of us have things that we would like to achieve in our lives. It could be two, five or ten years down the line, or perhaps we may want to leave a legacy of some kind. To realise these dreams, we need to be both focused and financially organised. This is the essence of True Lifestyle Financial Planning

It’s with this lesson in mind that I set out to write my book, Live Life With Purpose: A Guide to Getting a Life Plan and Sticking With It. This book will help you take the steps to live life with purpose. It will help you gain clarity. It will show you how to implement the six steps needed to create a sound Life and Financial Plan so you can ultimately achieve your goals.

We’re offering free copies of Live Life With Purpose to anybody who feels they would benefit from it. Simply go to this page, tell us where to send it, and we’ll pop a copy in the post for you.

I hope you enjoy reading the book and putting into practice some or all of the lessons it contains. Even if just one idea sparks you into taking some action, then I have achieved what I set out to do.