There are lots of people who will have an opinion on what financial planning is, this blog is our opinion on firstly what Financial Planning is and secondly the role that a Financial Planner plays in this process.
I think it is fair to say that the term IFA conjures up images of someone in a pin striped suit trying to flog you an investment or insurance policy. Times have changed and for the better!
Firstly it is our belief that we are now a profession, we are Chartered Financial Planners, this is not just a fancy title that we can give ourselves, this is an accolade that is awarded for firms that adhere to a strict code of conduct and have individuals within the firm that have individually attained Chartered status, a Level 6 (Honours Degree equivalent) qualification, more on this in a future blog though.
A further change relates to how you now pay for Financial Planning and Financial Advice, gone are the days of opaque charging structures and the smoke and mirrors associated with commission payments.
We are proud to charge fees for the work that we complete for our clients. Charging a fee means that we are working for you and not for a product provider, we do not need to sell you something in order to get paid. It means we can deliver truly holistic, independent financial planning and financial advice.
This brings me to the point of this blog, what is financial planning and why would you want to pay someone a fee to provide you with a financial plan?
Let me use an analogy if I may. Imagine you want an extension on the side of your house. You have spoken to a builder and he is happy to build what you want, a simple one storey side extension. This is built, looks great, you pay the builder and he moves on to the next project. A year or so passes, the extension starts subsiding and cracks appear in the walls, that’s bad enough but you also realise that in fact you needed a two-storey extension from the outset.
Imagine the scenario again, this time you have employed an architect. The architect spends time with you, she asks questions that are relevant to you and your circumstances, she understands the reasons why you want to build a one storey extension but is brave enough to challenge you and suggest that maybe you would be better suited in the longer term if you were to consider a two-storey extension. She draws up the plans that the builder will work from and these contain the all-important foundations that will ensure that the extension doesn’t subside and is fit for purpose for many years to come. You may need to give it the odd coat of paint, but in essence the structure of the extension is sound.
It makes perfect sense in this scenario to use an architect, you paid the architect a fee for her work but this resulted in plans being drawn up that ensured that the right foundations were built and also ensured that the extension was what you needed, she challenged your thinking in terms of your overall needs and thus, you avoided having to rebuild the extension the following year.
Financial Planning is the process that we use to ensure that the correct foundations are in place to allow you to achieve your goals and aspirations. If you want to retire at 60 and enjoy a certain lifestyle it is all very well saving into a pension, but do you know that the pension is working in the right way for you? Are you paying in enough? Have you considered alternatives? Could you retire at 55 or will you need to go back to work at 70 because the money has run out?
A good financial planner will be able to help you ensure that the correct foundations are laid, and that the savings and investments that you have are relevant for the long term, to help you to achieve your goal. In addition they will ensure that all aspects of your circumstances are considered when constructing the plan, for example, is there sufficient life cover and/or income protection?
The key here is that you wouldn’t build an extension without ensuring detailed plans are drawn up and the foundations are laid correctly. We believe the same approach should be adopted when it comes to building your financial future.
So Financial Planners are a bit like financial architects, and if necessary we can also be builders but unlike builders we will not take a break every hour and we will not drink all your tea and eat all your biscuits!