Financial planning and financial advice are closely related but distinct services you might want to use to manage your money effectively. Here’s how they differ:
 

What is financial advice?
 

Financial advice refers to specific recommendations or guidance given by a finance professional to help you make decisions about your money.

Scope

  • An overarching strategy: Financial advice can cover a broad range of topics such as investment choices, asset allocation, tax strategies, and other financial decisions.

  • Immediate or short-term focus: Advice may be more focused on immediate decisions or short-term goals rather than comprehensive long-term planning.

 

What does a financial adviser do?

  • Specialist expertise: A financial adviser has expertise in specific areas like investments, tax planning, or insurance, offering advice that aligns with your goals and risk tolerance.

  • Transaction-based: They may recommend specific financial products or services based on your needs and objectives.

 

How does the financial advice process work?

 

  • Step 1 - assessment: The adviser asks questions to understand the client's financial situation and what they want to achieve.

  • Step 2 - recommendation: The adviser provides specific advice or recommends financial products that suit the client's needs.

  • Step 3 - implementation: If the client is happy to proceed, the adviser implements their recommendations, setting up products or investments where required.

 

What is financial planning?


Financial planning is the process of assessing your current financial situation, setting financial goals, and creating a long-term strategy to achieve those goals.
 
Scope:

  • Comprehensive: Financial planning covers various aspects of your financial life, including budgeting, savings, investments, retirement planning, insurance needs, tax planning, estate planning, and more.

  • Long-term focus: A financial plan typically focuses on helping you achieve long-term financial security and meeting future financial needs.

  • Holistic approach: It considers your entire financial picture and seeks to integrate different strategies into a cohesive plan.

 

What does a financial planner do?

  • Objective guidance: A financial planner helps you analyse your financial situation objectively and develops a personalised plan tailored to your goals and circumstances.

  • Implementation and monitoring: They assist in implementing your financial plan and will monitor its progress, making adjustments as needed.

In the UK, financial planners are required to hold specific certifications or licenses, and they often adhere to professional standards and codes of ethics.
 

How does the financial planning process work?

 

  • Step 1 - initial assessment: Gathering detailed information about your financial situation, including income, expenses, debts, assets, and liabilities.

  • Step 2 - plan development: Creating a detailed financial plan tailored to your goals and circumstances.

  • Step 3 - implementation: Executing the plan, which may involve setting up accounts, purchasing insurance, or making investments.

  • Step 4 - monitoring and reviewing: Regularly reviewing and updating the plan to reflect changes in your financial situation or goals.
     

Key differences between financial advice and financial planning:

  • Scope and focus: Financial planning is comprehensive, long-term, and holistic, covering all aspects of your financial life. Financial advice, while important within the planning process, tends to be more focused on specific recommendations or decisions.

  • Implementation: Financial planning involves creating and implementing a strategy over time, while financial advice may include immediate recommendations or ongoing guidance on specific financial matters.

  • Regulation and certification: Financial planners often have broader regulatory requirements and may hold certifications like Certified Financial Planner (CFP), while financial advisers may specialise in specific areas and hold relevant licenses (e.g. securities licenses for investment advisers).

In summary, financial planning provides a strategic roadmap for achieving financial goals across various areas of your life, while financial advice offers specific recommendations or decisions within the context of that plan. Both are essential for managing your finances effectively and achieving long-term financial security.

Speak to one of our experts about how a financial planner can help you to take control of your finances.
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