What Is Financial Planning Anyway?

And how do you find the best advisor?

Financial Planning

Financial planning. What’s that again?

Having a financial plan is essential if you want to worry less about money. It’s that simple. Actually, you probably already have one! At its most basic, it’s a combination of money goals that you’re working towards: it could be to retire at 50, to get out of debt by 40 or to liquidate all your assets and take off on a round the world adventure at 30. It’s great to have a big goal - figuring out what you really, really want has to be the first step of any financial plan - but there are some details, practices, habits and financial products that you’re going to need to understand if you’re going to get there.

How does it work?

Once you’ve established your goals, you might start focusing on some less glamorous issues to do with your finances. How would you/your family get by if you couldn’t work any more? Are you paying too much for car / home insurance? Is it time to swap mortgage providers? Are you wasting money each month on stuff you don’t use?

With so many questions, most of which probably have a simple yes / no / don’t know answer, it’s no surprise that many people choose to employ a professional financial advisor to help with their plan.

How do I choose an adviser?

Just like doctors and lawyers, these all-knowing ladies and gents are regulated by a professional body, the FCA (Financial Conduct Authority). You can use the FCA website to check that any adviser is accredited, and it’ll tell you what to do if you think you’ve encountered a dodgy one. To find an approved adviser, you can check out specific trade bodies for the sort of advice you need for example The Money Advice Service Retirement adviser directory for pensions, Personal Finance Society for mortgages and general planning or biba.org.uk for insurance.

It’s all very well going on personal recommendation or word of mouth. We would recommend you find a handful of advisors and start meeting them all - talking about money is very personal so you want to know who you’ll be working with. The first meeting is a get-to-know-you meeting and is usually free so take the opportunity: you will understand how they work, what you will need to prepare and how much their services cost. Just because your best friend had a lovely meeting last week with a very friendly chap from a firm on the high street, doesn’t mean she’s on to a winner. And the true worth of an advisor may only become apparent after many years, so it makes sense to pick and individual or a company who’s been around for long enough to have a proven track record.

What are the different types of advisers?

  • Brokers are individuals who will sell you a product, like insurance or a mortgage.
  • Brokers who sell pensions and other products related to retirement and later-life financial planning are now required to be even more robustly regulated than other advisors, to avoid them earning commission from the charges they pass on to their clients.
  • Mortgage advisers know everything there is to know about mortgages, but don’t go asking them to recommend the latest hip weekly budgeting app or give you the low-down on tech shares. They’re one trick ponies but they’re great at what they do. They usually earn commission on what they sell you, though…
  • Independent advisers are people with access to every product on the market, so can suggest any kind of financial product.
  • Restricted advisers are limited to only a certain pool of resources, but they have really detailed expertise in their field, so may be able to give you more rigorous and specific advice than their independent colleagues, who play the whole field.
  • “Holistic advisers”– most of the above are in effect holistic, in that they can give you guidance on a whole range of financial planning options. But those who actually use that somewhat new-agey buzzword are likely to want to take your entire financial health in hand and help you out with everything from day to day budgeting to long term investment plans.

So, armed with this basic how-to guide, you can begin the search for the financial adviser that’s right for you. May she/he help you achieve all your goals!