What’s in a name? A lot!

By David Lamb CFP™ MCSI

I have seen the name given to people who give advice or sell financial products change many times in the 38 years I have worked in the financial services sector.

Common examples include insurance agent, financial consultant, broker, financial adviser and wealth manager. The latest favoured term seems to be financial planner.

Unfortunately, many ‘financial planners’ are just financial advisers. Financial planner may sound better but there is a big difference between planning and financial advice – and not just in the qualifications.

Financial advice is the recommendation of a financial transaction at a fixed point in time – the selling or, or helping to buy, a product – whereas financial planning is an evolving action plan, resulting from a cyclical process.

Financial planning may involve financial advice (although not necessarily from the financial planner) but it does not need to involve product recommendations. A financial plan may, or may not, involve providing regulated financial advice.

Most importantly, clients do not need to be asset rich or earn high incomes to require financial planning.

In this new series of articles for 2023, I am going to describe the financial planning process – as detailed by my professional body the Chartered Institute for Securities and Investment and recommended for a Certified Financial Planner.

Qualifying as a Certified Financial Planner (CFP™) requires years of experience and the completion of a difficult and stringent process including standardised exams and a demonstration of ethics.  The most important aspect quality of a CFP™ is that they have a fiduciary duty, meaning they must make decisions with their client’s best interests in mind.

Future articles will include: what you should expect from a first meeting with a financial planner; the data required for a detailed financial plan and determining objectives; the importance of assumptions; the structure of a financial plan; why cash flow modelling is essential in financial planning; how the plan may be implemented; and why regular reviews are essential.

My experience shows that financial planning works well if it is done with clients as opposed to for them, but it works best if clients do their own financial planning and I just facilitate the meeting, use my professional knowledge when required and produce a structured financial plan.

Next blog: what you should expect from a first meeting with a financial planner – and what to be wary of.