| There are really only two types of services you can | | | | Cashflow modelling is crucial as it gives your Financial |
| choose from when getting help with planning your | | | | Planner a context within which advice can be provided |
| finances, although some financial advisers do not offer | | | | because it highlights any areas of vulnerability. More |
| both. | | | | importantly, it gives you a context within which you can |
| The key question you should ask yourself is which one | | | | make decisions as the effects of various scenarios |
| is best: | | | | can be modelled. |
| Financial Advice or Financial Planning? | | | | This could be termed your own financial map for the |
| Clients that get financial advice often end up treating | | | | future. On many occasions clients are better off than |
| their financial programme like a shopping trip. They | | | | they imagined and surprised with the results, meaning |
| simply progress through life collecting policies. It is very | | | | they can make more accurate financial decisions. |
| much an event driven exercise. | | | | As you can probably see, financial planning is much |
| For example, you may have children so you buy some | | | | more proactive and holistic/comprehensive. The |
| life assurance or see an advert and buy an investment | | | | problem is that it only works properly if it is impartial. |
| policy etc. | | | | You need to have the confidence that all your options |
| Because it is event driven the advice is reactive | | | | have been considered; writing a will for Inheritance Tax |
| problem solving, and will almost always result in a policy | | | | planning versus purchasing an insurance product is a |
| being sold to you (or doing the research yourself and | | | | good example of this. |
| you buying the policy without advice). | | | | Indeed, it may be the case that you already have |
| The problem with this is that there isn?t any form of | | | | enough money to achieve your goals in life so the best |
| measurement that takes place until it?s too late. You | | | | strategy may be to spend more. |
| reach the checkout, i.e. retirement, and have to hope | | | | Equally, if by measuring your worth against your |
| you have enough in your trolley to last you for the rest | | | | objectives it is shown to be a very rosy picture, you |
| of your life. | | | | could reduce the risk with your existing investments. |
| Or worse, something goes wrong on the way to the | | | | This protects you from the volatility present in many |
| checkout ? illness, accident etc and you have to | | | | portfolios. |
| rummage in the trolley in the hope that you have | | | | Commission or Fees? |
| something in there to deal with the problem. | | | | If your adviser only got paid if they sold you a policy, |
| In simple terms it is a retail service and the people that | | | | you may well question the impartiality. Even more |
| provide it get paid according to what they sell | | | | worrying is that ongoing reviews and monitoring is |
| (assuming they are paid by commission and not by | | | | essential to make sure your planning remains on track. |
| fees from you). | | | | If your adviser only gets paid when he/she sells you |
| Having said that, a financial advice service may be | | | | something, can you really rely on the ongoing attention |
| appropriate for your needs now before you progress | | | | to your planning needs? |
| to a more comprehensive financial planning service. | | | | The Financial Tips Bottom Line: |
| Financial Planning is much simpler and more effective. | | | | So to summarise, financial planning is more proactive, |
| The first step is to work out what your objectives are, | | | | holistic and comprehensive, and may be a more |
| making sure you spend time to work out both your | | | | appropriate proposition for your needs than financial |
| needs and your wants. The next step is to work out | | | | advice. Getting impartial advice is the key, and this can |
| how far all your existing plans and investments will go | | | | be achieved with a fee based financial planning |
| towards achieving your objectives. | | | | service. If you deal with an adviser, remember to ask |
| Cashflow forecasting software is then used to build | | | | them what financial planning services they offer. |
| the framework of your financial plan, marrying up your | | | | If they only provide a financial advice service, maybe |
| objectives with your current and future sources of | | | | it's time to interview other advisers that DO offer the |
| income. | | | | type of service that you're looking for. |