What is financial advice? Do pearls of wisdom from your parents count? Recommended fund lists from an investment platform? Or is it something only a select range of professionals can truly give you?
Technically speaking, financial advice is a regulated service, but most people don’t have so narrow a view of it. In fact, peel back the layers of the Advice Onion and you’ll find that what everyday people think of as financial advice covers a vast continuum of tipsters, guides and qualified sages.
Interestingly, 26% of the 4,000 people we surveyed said they get financial advice from ‘mum and dad’; 70% of investors who pick their own investments said they’d used a Best Buy fund list; and only 10% of people said they currently use a financial advisor.
Within the #50ShadesofAdvice in the onion of public perception, there are a handful of professionals you can hire to help you get financially savvy, or who can take on the legwork for you.
The most common are independent financial advisors and chartered financial planners (both highly qualified and regulated, and suited to people with tens of thousands of pounds to manage), and financial coaches (for people who want help getting to grips with the basics but not personal recommendations).
Here are the main differences between them:
At the top of the pile is the financial planner, who usually takes into consideration your entire financial life – analysing your present and projecting your future – to help you develop a comprehensive long-term plan. (It’s in the name, really!)
A financial planner will help you define your financial goals and show you the best way to achieve them, tying in everything from your debt management and spending habits, insurance and taxes, savings and investments, pensions and estate.
The lines blur a little between financial planners and financial advisors (and some professionals offer both services, with a little coaching tied in too), but the main difference is what you hope to achieve. Whereas planners set out your entire financial future, straight-up advisors are more likely to zone in on specific areas.
Many people go to a financial advisor seeking product recommendations or answers to specific questions. Which pension should I open and what will retirement income be? How can I be more tax-efficient with my savings and inheritance? And so on. And as long as they are an independent financial advisor – i.e. they don’t work directly for your bank or another specific company – they will scour the whole market to find the best deal for you as an individual.
Unlike planners and advisors, a financial coach doesn’t need to be regulated by the FCA (Financial Conduct Authority). They can’t give you advice about which products are best for you, where exactly to put your money, or how to plan for specific long-term goals. Instead, they focus on fundamental financial knowledge and habits.
A financial coach’s aim is to help you change your behaviours around money. Which could mean reducing your spending, getting your head around savings and investments, or suggesting ways to get yourself out of debt. But these are always general tips rather than specific recommendations.
Much like a coach, financial therapists deal in your general behaviours around money, rather than telling you specifically what to do with your money. However, whereas a coach will look at what you do in the present, a therapist might also delve into your past to see where those behaviours have come from.
Financial therapists deal with your emotional attachments to money, and habits that may have been picked up from people like your parents, to combat things like money-related stress and unhealthy spending habits. But again, they are not regulated to give advice and cannot make specific product recommendations.
Financial Planner: a financial plan is usually a one-off fee of £1,500 or more, with the option of longer-term check-ups for additional fees
Financial Advisor: the UK average is £150 an hour but this could vary from £75 to £350 an hour; or a set fee for a piece of work (which could be several thousand pounds), or an ongoing fee for regular
Financial Coach: typically upwards of £50 an hour
Financial Therapist: typically around £150 to £200 for a two-hour session
Independent financial advisor fees are often considered too high to be worthwhile for many people, and financial planning is usually reserved for the considerably well-off. This has led to what’s known as the Advice Gap.
However, many advisors offer free introductory sessions to see if it would be right for you before you commit. Failing that, this is why cheaper, semi-skimmed services like coaching are also so important for the nation’s financial health. Read more about advisor fees.
Virginia, 55, shares her surprise at some of the unexpected extra value that comes with seeing a professional:
"I spoke to a financial advisor about my insurance a few months ago. First time I’ve ever done that. They came to me and gave me really good tips, which I did take onboard.
“I’ve really become quite interested of late of trying to put things in place for my age. I’ve lost a lot of friends in recent years who had not put things like wills in place, and I’ve got my son at university so I don’t want to just assume.
"The advice was absolutely SPOT ON! Things I never knew.”
“It was things like ‘Did you know if anything happens to you between now and the time your son is finished at uni that your insurance could give him an income?’ and ‘Did you know that you could do this and that for him and it would only cost another £6?’. They really taught me. Made it all clear as day."
Of course there’s never a guarantee that every client will leave as satisfied as Virginia, but the same can be said for practically everything finance-related.
We think if you have a large sum of money or an estate you need to manage, and if you can afford professional advice, it may be worth seeking help from an independent financial advisor or a chartered financial planner. For people with under £100,000 to their name, a financial coach or a one-off session with an advisor may be more suitable, or you could just start off with some basic tips online.
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