August 27th, 2021
The difference between financial advice and planning and how the latter can benefit your clients
Many people are probably familiar with the title “financial adviser”, which is someone you can speak to for financial advice. However, the term “financial planner” is not as well-understood and so the two titles are often used interchangeably.
It probably won’t surprise you to know that, as financial planners, we believe there are key differences. We also believe that while both jobs have their uses, there can be helpful benefits to working with a planner instead of an adviser.
Financial terminology can sometimes be confusing, which is why it’s important to dispel some of the jargon. Read on to find out what the differences are and how working with a financial planner can benefit your clients.
Financial advisers typically give one-off solutions to a particular problem
To put it simply, the main difference between an adviser and a planner is that the former looks after their clients’ money, while the latter helps their clients reach their financial goals.
For example, let’s say your client had a question about how to save more for retirement and they went to visit a financial adviser. If they did, the adviser would probably give a simple answer, such as suggesting a particular pension product.
While this would be a simple and straightforward answer, your client may not understand the full picture. When making a financial decision, such as one that affects retirement, there can often be a lot to think about.
Instead of getting a one-off simple answer, it’s sometimes better to look at the bigger picture. This is where a financial planner can help.
Financial planners are able to consider more long-term solutions to financial issues
While a financial planner can also give your clients advice on specific products to meet their needs, they will also consider a more long-term approach. One of the key ways they do this is by getting to know your clients.
A planner will take the time to get to know your clients, finding out what their circumstances are currently and what they desire for their future lifestyle, such as when they retire. By understanding a client’s goals and aspirations, a planner can start to put a plan in place to turn those dreams into reality.
While a financial adviser’s solution to a problem might be a specific product, with a planner the solution is the plan itself. While products can feature in a financial plan, the key difference is that they are only a means to an end, rather than an end in themselves.
Cashflow modelling is one of the tools that can help your clients
While most financial planners don’t have a crystal ball with which to gaze into the future, and you should be wary of the ones that do, one important tool they do have at their disposal is cashflow modelling.
This involves assessing your client’s current wealth and using it to create a forecast of how it will change over the course of their lifetime. It considers both their income and expenditure and shows how these could change in the future.
Having an accurate forecast of what their finances will look like in the future can help your clients to plan ahead.
For example, the forecast may show that your client doesn’t have enough income in retirement to support their desired lifestyle. If this is the case, working with a planner can help them boost their pension savings or change their investing strategy.
Financial planning can give your clients greater peace of mind
One of the main benefits of working with a planner is that it can give your clients a greater sense of control. Whatever their goal is, having a clear plan in mind can be essential to making sure they reach it.
In contrast to the one-off occasional meetings with a financial adviser, working with a financial planner is an ongoing process, which can give a greater sense of confidence and security. With regular reviews, a planner can give your clients reassurance that they’re still on track to meet their goals, whether that involves retirement, homeownership, or their investments.