What is the difference between financial planning and financial advice?

What is the difference between financial planning and financial advice

It’s time to shine a light on what we do as financial planners and how it differs to financial advice. And if you’re already familiar with what we do and the differences, view this as your guide to help educate other people who do not yet know the powers of financial planning.

As financial planners, we often use the terms ‘financial adviser’ and ‘financial planner’ interchangeably. We do this for two reasons:

  • A financial planner is a specific type of financial adviser (but the same cannot be said in reverse).
  • Financial planning is still a lesser-known counterpart, although it is coming to the forefront, and gradually changing the landscape of the financial services industry.

Simply put, a financial adviser offers a solution to a specific problem or helps you manage your money, whereas, a financial planner considers the bigger picture. They look at an individual’s concerns, priorities and goals, and offer a financial roadmap that will help them navigate their finances both now and in the future.

What are the key differences between financial planning and financial advice?

Financial planning vs financial advice

Both Financial Planners and Financial Advisers are highly qualified and skilled individuals, and both provide advice on your money. Both also need to understand your financial situation and what your needs are. So what sets them apart?

Financial planning is more centred around your life goals. The advice and recommendations help you map out your route to achieve them. And your bespoke financial plan will help determine how well equipped you are to get to where you want to be, and what actions you can take to improve your overall financial position.

Financial advice tends to address one query in isolation, and this will be more focused on a particular area of your finances. Rather than getting a full breakdown of your financial situation, financial advice tends to provide an answer to a problem that you’ve already recognised.

Holistic vs focused

Financial planning takes a more holistic approach. Your financial planner will draw a complete picture of where you now, where you want to be and what your main priorities and concerns are. The result is a plan tailored to you, outlining a strategy to help you get to where you want to be.

As we’ve already mentioned, financial advice takes a more focused approach. This might be the route you want to take if you have a burning question about one aspect of your finances. However, the industry is slowly changing as more people learn that looking at the whole person and not just the problem makes for much more valuable advice.

Long term vs short term

Financial planning is more long-term in nature. The steps outlined in a financial plan are the seeds sown to secure your financial future. But of course, it takes time to see the fruits appear. And so, financial planning is typically an ongoing service. Your financial planner will be there to keep you on the right track and review and adapt your plan as circumstances change.

Financial advice is more short-term in nature. A financial adviser will offer a solution to your specific need and is typically transactional; once a product is recommended, and the transaction ends, so does the relationship. An ongoing service tends to involve investment analysis and further transactional recommendations.

Fixed fees vs a percentage of investments 

Financial planners typically charge all-inclusive fixed fees, depending on the complexity of your situation. This fee will cover everything from your initial discussions, right through to the implementation of the recommendations. For more information on how we charge, you can read our recent article here.

Financial advisers usually charge a percentage of your investments, so the more you have, the more you will be charged.

Starting your financial planning journey

We know that financial planning changes lives, but it still seems to be one of the best-kept secrets. So, whether you’re already working with us, or new to financial planning, we hope this article has given you an idea of why we believe in our way of working.

If it’s got you thinking about your finances, or you know someone that could benefit from financial planning, here are some helpful resources for anyone starting their financial planning journey:

  • To find a financial planner you can trust, you can use our guide here
  • To learn more about financial planning you can visit the CISI Financial Planning Week website here
  • To make sure a company is authorised and regulated by the Financial Conduct Authority, check the FCA register here
  • To get to know a bit more about us and the areas we advise in, you can view our previous webinars here

And if you have any questions at all or would like to start planning for your secure financial future, please don’t hesitate to get in touch and speak to one of our professional financial planners.