From time to time, we get asked why people should be pay fees for financial planning advice. To be honest, it baffles me why people should expect a financial adviser to offer free services.
I believe that this is due to many misconceptions, and here just a few:
- We are paid a commission by the companies that we advise you to invest in
- Banks offer free ‘advice’ so why shouldn’t everyone?
- There’s so much information online, freely available knowledge doesn’t require paying for
All of these assumptions are myths, and as the saying goes, ‘there’s nothing more expensive than free advice’.
Financial advice and fees
Independent financial advisers and planners charge fees and are only allowed to receive commission from insurance and mortgage providers.
As you’d expect we must have professional qualifications. In addition, we must continuously evidence ongoing study in the form of continuing professional development (CPD) to our professional body. This all makes sense, as you certainly wouldn’t trust your retirement to someone who doesn’t have any relevant qualifications!
All financial advisers must also have a Statement of Professional Standing (SPS). This is applied for each year to allow us to be able to give regulated financial advice. To apply we must evidence a minimum of 35 hours CPD for that year.
Financial planners start as trainees and work alongside experienced advisers for a set period. During that time, they must study outside working hours to pass examinations and coursework. Once trained, we undergo annual testing to ensure that our knowledge is continuously up to date.
Our knowledge and understanding of finance are why you pay fees. In in that respect we are no different than a solicitor or an accountant; you are paying for experienced advice.
Be held accountable
Our clients are also paying us to hold them accountable to their financial plans. We help stop them making rash decisions which could scupper their plan. We also keep them calm in times of trouble.
It is by doing this that we are confident our clients will be better off financially in the long term. As a consequence be able to make better and more informed lifestyle decisions.
We love working with our clients, and seeing them achieve their goals is priceless. But for us to delve into your finances and get to know you and what you want to achieve takes time. It also requires effort and hard work from our whole team.
Independent financial planning
When choosing a financial planner, find out what service they offer first. Is it full holistic financial planning or simply product advice? Ask them what their services will do for you. It is also important to ask them if they can offer independent advice or restricted advice. Restricted advisers are nearly always tied to a single provider such as a bank.
In my experience, this generally means they are less concerned about your ongoing costs and more concerned with selling you something.
Co-Navigate’s financial planners are exactly that, planners. We will only recommend a regulated financial product if it is necessary to be able to carry out your financial plan. We are also independent, meaning when we do make a product recommendation, we are doing so having researched the entire marketplace on your behalf.
After our initial discovery meeting which we provide at our own expense, and assuming we both agree to work together, we spend hours building a picture of your finances and linking them with your goals. And once in place, we regularly meet our clients to review their financial plan and adapt it where necessary.
Banks and ‘advice’
I believe part of the confusion is due to people historically visiting a bank or building society for ‘advice’. A phone call from the bank manager asking to see you used to be quite a daunting thing. Invariably, most people accepted the invitation. Having been ‘on the other side’, I now know that this has been a good sales tactic by the banks. As a result, they were able to get in front of their customers and sell them more products.
They may listen to you, but they will not provide a financial plan that helps you achieve your goals. Instead, they will give you the information about their products and then it’s up to you to assess which product meets your needs. But none of this has anything to do with financial planning and everything to do with buying a financial product.
Online financial planning ‘advice’
If you Google ‘best pensions’ or ‘best investments’ you will get a lot of information. This may be useful for signposting, but is so generic that it can never be called ‘advice’.
Everyone’s situation is different, particularly when it comes to finances. Your financial goals will be as individual as you are, so general information is not always helpful and can sometimes even be harmful, costing you much more in the long run.
Most people looking for help with their finances recognise that they must pay their adviser for their time and expertise, and that financial planning is much more than simply choosing a pension. I hope that this brief overview shows you why it’s money well spent.
To speak to us about our financial planning advice services, contact us today. You can also contact our Newcastle office on 0191 228 6130.