What’s the difference between a financial planner and adviser – and does it matter?

Planner or adviser. What’s the difference?

I suspect some answering this this question might just shrug their shoulders. Surely they’re the same thing?

Well, yes, and no. All financial planners offer advice. But not all advisers are planners. These two terms are frequently used interchangeably (and some firms offer a bit of both) but there are important distinctions that mark them apart.

People not products

In very simple terms, financial advisers offer specific products designed to solve a narrow range of issues. Planners take a broader view and help you to map out a financial future that will suit you as your journey progresses, using products to provide that solution.

For the most part, an adviser is concerned with helping you pick out a pension, insurance provider, or investment fund. They’re principally concerned with helping you select products for your money and investments.

In a world where we’re used to picking out a car or home insurance online from a menu of options, this seems straightforward. But the problem with such a narrow approach is that it misses a great deal of context.

It doesn’t take account of your overall objectives in life, and it doesn’t involve follow-up support to make sure you’re always on track.

A planner, on the other hand, looks at the bigger picture.

Engaging a planner is an ongoing relationship. We aim for a more holistic approach that sets your financial goals – whether that’s planning for a comfortable retirement, leaving a legacy, or something nearer term. We then help you think about the products and services you need to meet these goals.

How it works

Let’s say you inherited £10,000 and were unsure of how best to invest it. Should you set up a new investment fund, pay into a pension fund, or do something with more immediate impact such as overpaying on your mortgage?

If an adviser takes this on, they’ll look at your case, ask you questions to assess the level of risk you’re comfortable with, and the time horizon you’re investing for.

This advice will take into consideration the state of financial markets and look at what sort of rate of return you could hope to receive with different options. The adviser can set out recommendations on where to invest – and where to avoid.

The difference with a planner is that this one-off investment is only part of the story. The conversation is likely to start very differently, with one of our first questions likely to be “What do you want to achieve?”

How will that extra £10,000 change your plans for the next decade or more? Can it speed up your journey towards reaching your financial goals? What knock-on effects might this lump sum have on other aspects, such as tax liabilities? For example, would it be wise to gift some of this money to avoid a hefty tax bill?

An important area of financial planning is analysing what spending and saving levels will do to your finances in the years ahead.

Visualisation

With cashflow modelling, we help you visualise the impact of different scenarios, such as earning a higher salary, taking on more risk in your investments, putting more aside for your pension.

Too cautious and you might have to work for longer, overdo it and you risk losing money you can’t afford to.

This sort of approach lets you know when you should be focusing on accumulating wealth, and when you should be able to start winding down towards retirement.

With a broader range of questions – and a longer-term plan – you’ll have more options to choose from. The course of action you take could look very different.

Why it matters

Advice or planning? There are advantages to both approaches, but for me, financial planning is about people, not products. As mis-selling scandals in recent years have shown, there have been occasions when advisers have crossed a line and pushed inappropriate financial vehicles on their clients. When you focus too much on the product and not enough on the person behind it, this can lead to big problems.

I believe there can be serious disadvantages from not seeking out something more long-term.

Firstly, while many of us might start off asking for something specific, like a pension or ISA, in my experience, often what we really want to know is the answer to something less tangible: Will I have enough?

What makes “enough” differs from person to person. It could be paying off the mortgage to give you greater financial freedom, retiring early, or having the flexibility to gift with ‘warm hand rather than cold hand’. Products are only a small part of the tools to help you get to the lifestyle you want in the future.

Secondly, just focusing on products is also backward-looking.

Even though we can make our best estimates, we know there’s no guarantee how a fund will fare in the future. That’s why the key with a financial planner is ongoing review. We meet our clients at least annually to talk through how their investments have fared and how their goals might have changed.

In the age of Consumer Duty obligations, there’s rightly greater pressure on the personal finance sector to show how it looks after clients’ interests. So while, at first sight, it might seem like there’s only small differences, or that planner and adviser are two sides of the same coin, we want anyone who comes to Better World Financial Planning to know exactly what they’re getting.