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