Updated 03 September 2020
If you’ve ever wondered if a financial planner is the same as a financial adviser, or been puzzled as to the difference between an independent financial adviser and a restricted whole-of-market adviser… you’re not alone. Frances Kemp of Nurture Financial Planning prefers to keep it simple.
I recently met up with Keith Richards (no, not that Keith Richards, but the Chief Executive of the Personal Finance Society) and our conversation turned to labels. We in the financial industry use a lot of labels to describe our profession, mostly to indicate what kind of skills and qualifications we have and what kind of services we provide, and of course we all know perfectly well what they all mean between ourselves. But it occurred to us that the people who actually matter – the people out there looking for advice – might find all these different labels more confusing than helpful.
Some are more independent than others
Ideally, you’d have a label that accurately reflects whatever service you provide. However, the remit for providing financial advice can vary greatly. Some advisers may be able to offer fully independent advice, meaning they can advise you on any area and recommend any provider’s services or products. Meanwhile others may have some form of restriction, such as the advice areas they are limited to (e.g. pensions or protection) but still be ‘whole-of-market’ advisers, able to source products from any providers. Still others are more restricted even than that, and can only recommend products from certain providers (but you won’t find any of those on unbiased.co.uk). ,
What’s important is that the advice provided is suited to your needs, and that all relevant avenues have been explored. For example, an individual may require someone to manage their investment portfolio, taking advantage of any tax breaks and other opportunities, and checking that performance is satisfactory. This could be managed by either an independent or restricted adviser. However, a young family with a broad array of needs may need a full financial plan. Such a plan would, for example, put in place a policy to protect the family in the event of anyone’s death, illness or injury, and would look to provide a replacement income in retirement, or maybe even a house deposit in ten years’ time for the children. All these needs would be best served by an independent financial planner, especially if there are areas that require advice outside of a restricted adviser’s remit.
What do you want us to be?
Perhaps we financial advisers are guilty of adorning ourselves with elaborate titles, designed to reflect how long we spent studying for those exams – not to mention the ongoing demands of the regulator to keep up with many hours of ‘continuous professional development’. But who is the label for? Us or you? Who actually needs to understand what we do? What should the label tell you, and should it vary depending on the restrictions the adviser may be under?
The chances are that most people, if asked, would guess that an Independent Financial Adviser or IFA is some form of sole trader, working alone on complicated investment schemes. In reality, an IFA is often supported by a whole team of colleagues, and their advice offering could be all-encompassing, taking in everyday budgeting, family protection, retirement and later life advice. It’s certainly not just about investments.
The Financial Conduct Authority has gone to great lengths to improve transparency and reduce ambiguity over the years. In fact, Google revealed recently that the most common term searched for online is ‘financial planner’ or ‘chartered financial planner’ and not ‘Independent Financial Adviser’. Clearly, we shouldn’t be thinking so hard about what we call ourselves, and instead take more notice of what people are calling us.
Maybe it’s time for a new label, one that accurately reflects what people really want from us. Because financial advice isn’t just for a few elite investors who understand the jargon – it’s for everyone.
Frances Kemp is a Diploma-qualified Independent Financial Adviser at Nurture Financial Planning, where she advises both corporate and individual clients. In her spare time Frances enjoys activities that involve her two young children, and when she has time she also sings in a local band.