What Is Financial Planning?

Financial planning is the process of managing your finances to achieve specific life goals. It involves evaluating your current financial situation, identifying your short-term and long-term goals, and creating a tailored strategy to meet those goals. Financial planning is an ongoing process, not a one-time event. It requires regular review and adjustment to adapt to changes in your financial situation, goals and market conditions.

What Does a Financial Planner Do?

A financial planner is a professional who helps individuals and businesses with financial planning, managing money and achieving financial goals. These goals can vary from person to person, from investing and saving for a sufficient retirement fund to funding education or a new business venture. [1]

Some of the core services that a financial planner provides include:

• Financial Assessment - A financial planner carries out a thorough process to assess a client’s financial situation.
• Strategy Development - Based on the assessment, a financial planner will work with the client to develop a financial strategy to reach their financial goals. They also make the necessary adjustments if goals change over time.
• Implement the Strategy - A financial planner assists in putting the financial strategy into action. This may include setting up an ISA or opening an investment account.
• Ongoing Advice - A financial planner will give ongoing advice to clients. They can advise on anything from ISAs to investment options.

Some financial planners are named after the area they specialise in, for instance, retirement planners and investment planners.

What Is the Difference Between a Financial Adviser and a Financial Planner?

Financial planners are also known as financial advisers. While they both refer to professionals within the same industry, financial planners and advisers have slightly different areas of expertise. Financial planners look at the bigger picture of a client’s financial situation and goals. On the other hand, financial advisers offer financial products within a client’s financial goals and provide services such as investment portfolio management. [2]

Why Would I Need a Financial Planner?

Individuals often work with a financial planner if they wish to achieve the following:

• Set Realistic Financial Goals Whether you want to save enough to have a sufficient retirement fund or purchase a holiday home, a financial planner helps you set realistic financial goals.
• Navigate Complex Financial Situations From choosing the right investment options to optimising your tax strategy, financial planners provide expert advice on complex financial situations.
• Reduce Financial Stress Working with a professional to handle your financial planning can reduce the stress of managing your finances and making investments.
• Plan For The Unexpected A financial planner advises on emergency funds to ensure you are prepared for unexpected events such as divorce, illness and market changes.

Is It Worth Paying For a Financial Planner?

Not everyone will require a financial planner. However, it is a very beneficial investment for those who need assistance with financial planning. In a 2021 survey, only 8% of participating UK consumers had an ongoing relationship with a financial adviser. [3]

The pros of working with a financial planner include:

• Personalised Expert Advice - Financial planners have a vast amount of knowledge and experience. They give personalised expert advice to clients, depending on their financial goals and situation.
• Time-Saving - Managing finances is a time-consuming process, especially if you have a complex financial situation. By hiring a professional to manage your finances, you will have more time to focus on other important aspects than if you were to manage your finances by yourself.
• Improved Financial Outcomes - By implementing a strategy developed by a financial planner, you are more likely to improve your financial outcomes. This may include saving more money for your retirement fund and getting better returns.

Can I Speak to a Financial Planner for Free?

Most financial planners offer a free consultation for new clients. It is usually a face-to-face conversation or a telephone call. During a consultation, you will discuss your financial goals and get informed about the planner’s services, experience and fee structure. Initial consultations allow potential clients to decide if the financial planner is a good fit for them.

Before agreeing to work with a financial planner, make sure that they are authorised by the FCA (Financial Authority Conduct). At Financial Advisers.co.uk, we provide a comprehensive database of over 15,000 FCA-authorised firms including financial planners.

What Is the Typical Fee for a Financial Planner?

For services provided by a financial planner, you can expect to pay a fee. The fee structure of financial planners can differ, depending on the work carried out, location and experience. The most common types of fee structures include

1. Monthly Retainer - Most financial planners charge a monthly retainer for ongoing services and financial advice.
2. Percentage Fees - Other financial planners charge a fee based on the percentage of total assets managed by the planner. A percentage fee can vary from 0.5% to 3%. For example, if £20,000 is invested at 2%, then the percentage fee is £200.
3. Fixed Fee - For once-off services, financial planners often charge a fee with a fixed amount. A fixed fee can be a few hundred to several thousand pounds, depending on the type of service provided.
4. Hourly Rate - Financial planners may charge an hourly rate for the work carried out. These rates can vary from £75 to £300 per hour. This is often seen as the most expensive fee structure.
5. Combination - It is not uncommon for financial planners to charge a combination of fees. For example, they charge a fixed fee for developing a financial strategy and a monthly retainer for ongoing advice.

Before you begin working with a financial planner, it’s worth asking about their fee structure and any extra costs that you should be aware of.

What Should I Do Before Speaking With a Financial Planner?

If you have booked a consultation with a financial planner, you can be more prepared and organised for it by doing the following:

1. Set Clear Goals - Identify what you want to achieve, whether that’s buying a new house or becoming debt-free. Setting clear financial goals helps the financial planner develop a personalised strategy.
2. Know Your Risk Tolerance - If you are considering investments, identify your risk tolerance, whether it is low or high. Your risk tolerance will significantly influence your financial strategy.
3. Bring Relevant Documents - On the day of the consultation, bring any relevant documents such as bank statements. The right documentation can help the financial planner assess your current financial statement. You can ask the financial planner what documents you need to bring with you before the consultation.
4. Ask Questions - Prepare a list of questions that you would like to ask during the consultation. Common questions include asking about the financial planner’s experience, services and fee structure.