How do I know whether I am getting financial planning rather than financial advice?

Category: Financial Planning

Financial advisors who claim to be comprehensive financial planners often provide a surface level of financial planning.

Financial planning requires ongoing effort and cannot be based on incomplete data. Simplified forecasts fail to provide individuals with the comprehensive plans they need. Here are seven key indicators to look out for to gauge whether a financial advisor is committed to thorough financial planning.

Clarifies Your Goals and Objectives

It’s essential to have a clear destination in mind regarding financial planning. Simply aiming to accumulate a certain amount of money by retirement is not a genuine planning goal but rather an arbitrary investment objective. To truly achieve your financial goals, it’s crucial to understand what you want beyond just ensuring your wealth doesn’t run out. A skilled financial planner will ask questions to help define clear, measurable goals and explore what truly matters to you.

Collects Comprehensive Financial Data (Assets, Liabilities, Income, and Expenses; ALIE)

When creating a financial plan, looking at all your assets, not just investment accounts, is essential. A thorough plan should consider both tangible assets, like property, and intangible ones. You should also take into account your liabilities, income sources (both current and future), and expenses, which can be challenging to predict. You can create a realistic financial plan considering everything by looking at the big picture.

Verifies Your State Benefits

Almost everyone’s financial plan depends on State Pensions. However, it’s essential to check if you qualify before making assumptions. A good financial planner should always investigate eligibility first.

Analyse Your Previous Year’s Tax Return

Asking for your previous tax returns indicates that your planner takes their job seriously. This document contains a wealth of information that can provide valuable planning advice and help you better grasp your income sources and potential tax strategies.

Examines Work Benefits

Many people don’t realise all the benefits they can get from their job. Besides the pension and death in service, it’s essential to look into disability coverage, Private Medical coverage and other benefits. This is especially important if you receive share awards as part of your package compensation, as it can have significant tax implications. A planner can help you review these options.

Reviews Estate Planning Documents

Planning for the future of your estate is an integral part of managing your finances. A good planner will ensure all your essential documents, such as trusts, wills, and powers of attorney, are up-to-date and reflect your current situation and the changing legal landscape. This review can also help shape investment advice to ensure it aligns with your trusts and tax considerations.

Tailors Investment Recommendations to Your Financial Plan

Investment decisions should be based on a comprehensive financial plan. This helps you to navigate with visibility and make informed choices. Your planner will need to know key life events to focus on how your investments can best serve your overall plan, considering tax and cash flow. Performance is essential, but it’s not the only factor to consider.

Financial advisors may call themselves “comprehensive planners” even if they do not offer the full range of services. They may use “financial plans” to push expensive investments or justify their fees. However, more people recognise the value of high-quality financial planning, and professionals are meeting this demand. If you want a financial planner who offers comprehensive planning, look for someone who follows these seven practices.

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