Why Do I Need Financial Planning? - Is Regulated FCA advice Worth It??

Don’t worry if you’re not the planning type or even why you’re asking: ‘Why Do I Need Financial Planning?’

Most of us didn’t plan the kids, the dog and anything else we want to blame somebody else for (including the financial mess you may be in!)

But financial planning is a useful skill regardless of age and economic background; if you haven’t made a financial plan there is nobody else to blame – except yourself.

So, whether you’re 18 or 68 financial planning will help you.

Guaranteed!

Why do you need a financial plan?

This answer to this depends on you and your unique circumstances.

Maybe you’re just starting out on your career and want to make sure you take financially savvy decisions early on – so you can travel, start a family, buy a house, retire?

Maybe you’re starting (or have started) a family and want to explore the best savings/investment options and protection products for your needs?

Maybe you’re approaching retirement and need a plan to make sure your money lasts?

Estate planning needs may have be surfacing as your parents get older. Therefore finding a legal solution to preventing uncecessary tax payments is necessary.

Why do I Need Financial Planning? (fancy working longer?)

What if you don’t have a financial plan?

Then you may miss out on opportunities, squander needlessly or end up working longer (and harder) than you intended.

How does that sound?

Nice? Fancy some of that, do you?

Financial planning requires an open mindset and before this can be achieved you need to evaluate your beliefs, expectations and perceptions.

So, before you get sucked in to the latest ‘financial coaching’ advert on Facebook or Twitter; or part with your money for some ‘big returns’ on the latest cryptocurrency fad.

STOP.

Do I believe what I believe or what you tell me to believe?

That’s a good starting point.

Beliefs, expectations and perceptions are all shaped by the world around us. Our world.

That means our personal experiences and the experiences of others all shape how we think and feel about money, saving, investing and finance in general. Likewise, early experiences and examples set patterns in place that may (or may not) be of benefit to us later in life.

A couple of examples:

Aarons’s mother taught him early on about budgeting. Growing up in a single parent household meant things were tight. By budgeting each week for food, books and clothes Aaron learned that sacrifices had to be made. If he wanted something he didn’t just get it. He wasn’t a spoilt child. This early budgeting approach stuck with Aaron and has ensured savings and planning for the future are always at the forefront of every financial decision he makes.

In contrast….

Sophie grew up with ‘spendthrift’ parents who spent money on the latest ‘whim’ and lived a life eternally at the mercy of high interest rates on credit cards. They lived ‘beyond their means.’ Sophie’s mum and dad found it hard to say, ‘No.’ Sophie was a spoilt child who whined and usually got what she whined for. Sophie’s parents never budgeted and their overarching belief system was based on ‘luck’.

Sophie lives today under a garbage mountain of debt and never feels in control or peaceful in her mind.

One example shows how familial influences can shape beliefs and behaviours that positively enhance, or negatively diminish.

What did your parents say about money/wealth/finance/investing?

Anything at all?

The good news is that beliefs, expectations and perceptions can be changed. It may take some deep thinking; it may take sacrifice; but having better beliefs, expectations and perceptions is key and the very first thing you need to sort out.

Why do I Need Financial Planning? – Outside the Family

The financial services industry has grown fat with our inaction and lack of financial planning.

It’s to their benefit after all!

Consequently, too many ‘poor players’ within the industry have designed products that offer poor value (at best). These products which have often been accompanied by financial and legal jargon have managed to dissuade many of us from taking financial planning seriously.

And that’s dangerous to you.

If their true message could be in light’s it would read:

“Financial stuff is complicated. You are are too thick and dumb to understand. Trust us with your hard earned money instead”

So, many of us effectively delegate some of the most important decisions of our lives to complete strangers and justify this on the basis of our lack of education and understanding of finance, money, investing and wealth creation.

That’s not to say valuable advice is not worth paying for, because it is.

Ultimately, they may provide information, advise and coach but always remember: it’s your money – not theirs!

Why Do I Need Financial Planning? – Who Can You Trust for Financial Advice?

A Robo-advisor service?

A SIPP provider?

Your mates up the pub?

Your parents/brothers/sisters?

The Telegraph?

Google?

Warren Buffet?

Money Mail?

MoneySavingsExpert?

Or even (dare we say it) an advisor authorised and regulated by the FCA?

These can all be summarised as follows:

The Regulated Financial Advisor Market
Non-regulated (guidance)
Financial Coaching
The Wild West

“Advice is what you get when the person you are talking to wants to revel in the superiority of his or her own intelligence. IF you weren’t so stupid, after all, you wouldn’t have your stupid problems”

Jordan Peterson – 12 Rules for Life – An Anecdote to Chaos

Understanding a structured financial planning process

Why Do I Need Financial Planning? The Regulated Financial Advisor Market

Financial advice is strictly regulated by the UK’s financial watchdog the Financial Conduct Authority (FCA).

UK advisors have to be appropriately qualified and authorised to provide financial advice. Of course this can cover financial planning, savings, investing, pension provision and protection.

Following something called the ‘retail distribution review’ (RDR) huge improvements have been made with both qualification standards, continuous professional development and evaluations of ‘professional standing’.

In the UK, a distinction is made between information and advice. Furthermore, with advice there are further distinctions made between ‘restricted’ advice and ‘all of market’ advice.

If you’re seeking professional financial advice you must only engage with an advisor who is qualified and authorised by the FCA. If they’re not then they are unable to advice.

Full stop.

Why Do I Need Financial Planning? Non-regulated Guidance

If you’ve ever visited some of the government backed finance websites such as ‘The Money Advice Service (MAS)’ or ‘Pension Wise’ you will have experienced what non-regulated guidance feels like.

Impartial information is provided with the aim to inform and not persuade.

Unlike regulated advice, non regulated guidance cannot provide specific recommendations.

As mentioned earlier, the FCA makes a distinction between regulated financial advice and financial guidance.

If general information is given and non specific it’s guidance; but if a specific recommendation is made, itss not.

It’s a personal recommendation.

For example:

“Based on your circumstances and our evaluation I recommend you invest the whole £50,000 in XYZ shares”

This is specific and would be financial advice.

“Further to our discussions the cryptocurrency space could be a place to invest in for the future”

This is general information and non-specific so would not be financial advice.

The difficulty is that information and guidance is exactly that…um….information and guidance!

Why Do I Need Financial Planning? Financial Coaching (anyone?)

‘Coaching’ has become increasingly popular in many areas of life and financial coaching is no different.

Many coaches offer a broad approach to financial planning and goal setting. Due to the increasing understanding of how behavioural biases influence us and our decisions ‘coaches’ tend to focus on very personal aspects of our lives in order to gain a better understanding of our emotional drivers.

Maybe you think this is creepy Psyhsyco babble – but our underlying psychological condition impacts all parts of our life.

Coaching is one of those ‘buzzwords’ that seem to encompass everything from relationships to sport, from education to religion, from travel to blogging and everything in between.

Coaching has its roots in a mishmash of psycology waffle, group therapy and counselling.

Most coaching starts from the point of addressing a problem and then evolving a plan to provide a solution.

Money, wealth, investments etc are excellent candidates for coaching.

Simply google money coaching and you’ll be hit by a bunch of (mostly) unqualified ‘coaching experts’ that will gladly enrol you into their newsletters, email lists, courses and whatever else.

Coaching services are not regulated and whilst they may come across as appealing caution is urged.

Why do I NEED FINANCIAL PLANNING – The Wild West

To explain the Wild West I urge you to watch a documentary called ‘The Great Hack’.

I don’t necessarily agree with all the content and conclusions of the documentary but it does provide an excellent insight into how data is collated on all of us by the social media platforms we engage with.

After you have watched the documentary have a think about the types of data you provide via the various ‘opt ins’ and ‘solicitations’, you are bombarded with.

Increasingly, our data is becoming more and more valuable. Simply expressing an interest in an unrelated product or service can lead to YOU being targeted by sophisticated algorithms and unscrupulous companies that want to grab your hard earned cash and run.

Making the decision to specifically make a pension transfer, encash investments, make new investments requires a decision making process that may (or may not) benefit from ‘advice.’

Ultimately, the decision of how, what and when you make decisions is made by you alone. If picking up some advice along the way leads to a better decision then money spent on purchasing that advice, is well spent.

But please, at all costs avoid the Wild West!