The difference between a financial adviser and planner
<p><em><strong>Nobby Kleinman is an award-wining ex financial planner who developed</strong> <a href="http://moneyrules.com.au/" target="_blank"><strong><span style="text-decoration: underline;">Money Rules</span></strong></a><strong>, a personal money management program which anyone can use.</strong></em></p>
<p>It is little wonder people are reticent to seek out professional guidance when the industry itself uses terminology which is confusing.</p>
<p>Without resorting to Wiki to clarify the differences, here is simple logic to divide the two.</p>
<p>When you have available money (investable assets) and are seeking to invest for profit and most likely for retirement, then a financial planner should be consulted. Financial planners might also be specialists in the area of estate planning and tax efficient investments. Just like generalist and specialist doctors and lawyers, there are specialists within financial services.</p>
<p>On the other hand, when looking to manage personal funds to address the likes of lifestyle and debts, then a financial adviser is the person to seek out. There are even divorce financial advisers, retirement only aged care specialists. Or possibly even a money coach! This then also separates out the Risk adviser who covers insurance and protection products.</p>
<p>Recent reports concluded that 80 per cent of the population do not seek financial planners because they don’t believe they have sufficient funds. Yet this same 80 per cent is going to run into trouble further along the money track and more likely to be dependent on the government for financial assistance</p>
<p>More needs to be done to talk to people in general about money management to provide them with the confidence to get to a point in their life where they realise the need to consult with a financial planner to map out their futures.</p>
<p>That being said, more should be done by the financial services themselves to help the general public along a path to managing their money more efficiently, rather than just constantly looking to maximise profits through charging interest and fees and the sale of ‘products’.</p>
<p>It is little wonder people are sceptical of the big banks when they see the quarterly profit numbers in the billions splashed on the front pages of newspapers, and they realise just who it is that is contributing to these massive profits.</p>
<p>But the financial industry does not endear itself either when viewing the fees it charges clients to manage their money for virtually little in return. Most client funds are invested and left there to accumulate in the same portfolio without being actively managed. If fees were to be levied based on the percentage of annual return rather than assets under management, then there would be many poor planners! That of course also applies to the investment houses and financial institutions who are managing the funds.</p>
<p>If however those same planners were proactive in managing the broad spectrum of a client’s financial position then perhaps the trust may be more endearing and rewarding. The problem is that ‘helping’ clients has not been a financially rewarding aspect of ‘financial planning’! Money is earned when a sale is made and generally that is a product or a fee for service.</p>
<p>There will be a number who claim they are fee for service only and take no commission. This is the way the industry will go in the future. Charging clients for time or based on knowledge to provide advice is nothing new, and has been used by many services in the past, such as doctors and lawyers.</p>
<p>The financial planning industry wanted to be considered professional and has for many years gone down the path of higher education, supposedly to be of greater value to clients. Every so often, higher education standards become the imposition whenever there is a review of the industry with the resulting problem of driving experienced advisers out of the industry.</p>
<p>But higher education does not necessarily benefit clients who are mostly seeking limited advice around getting insurance and some retirement advice. The general population has a limited need while those with vast sums can afford to engage the higher end fees charged by accountants and larger planning firms.</p>
<p>It is because of a shrinking number of advisers that the majority of the population will no longer be able to afford ‘financial advice’. Future planning is left to their own devices until they are in a better position to seek out some-one to guide them. By then the need to catch up is generally a huge chasm leaving many bewildered as to how they will afford to retire in financial comfort.</p>
<p>Advisers and planners are passionate about their role in serving their clients and enjoy the work they perform. However, with constant and increasing compliance, educational and fiduciary pressures being applied by government regulators and life companies through ongoing higher standards, it is the clients who will eventually lose out.</p>
<p>The media focus on the small number of ‘rotten apples’ always seems to unfairly tarnish the whole industry. Instead, the media should take an even handed approach and also highlight the enormous benefits clients have received as a result of having worked through advisers.</p>
<p><img width="500" height="250" src="https://oversixtydev.blob.core.windows.net/media/23119/shutterstock_290952128_500x250.jpg" alt="Shutterstock _290952128"/></p>
<p>Education about getting financial advice at a young age needs to go mainstream, much in the same way that some banks set up savings accounts at schools to get children into the savings habit. Not only did the banks benefit from the exposure, but many of those children remained with the same bank after leaving school. Since then, profits have become the major driver in shutting down this avenue of client acquisition.</p>
<p>Advisers were and are still seen as a perfect source of getting new business and would only be paid a commission on the basis of successfully attaining clients for the companies. Without new business, there is no income. Commission are a fair way of payment, as the life companies paid nothing for employees or overheads to retain a sales force other than training and then compliance.</p>
<p>With the coming of ‘fee for service’ clients will no longer be able to have the life company pay the adviser through commission, but rather will be forced to pay the adviser for their time and knowledge.</p>
<p>Advisers are self-employed people and carry business overheads just like any other, all of which need to be paid for before a profit is turned. Many clients will look for a cheaper alternative and use the internet to find cost effective options, and in doing so, will miss out on the expertise offered by advisers. Even worse than cheap premiums and service is finding out that a claim is denied because the policy definition didn’t cover the insurance need. That’s what cheap insurance is for.</p>
<p>Yes, there is a difference between a financial planner and a financial adviser. But at the end of the day, whichever you need is more likely to have years of education and experience and will never be the cheapest alternative. So be advised to choose wisely when seeking valuable financial advice!</p>
<p>You will pay for your education whether you wish to or not. If you think the cost of education is expensive, consider the cost of ignorance!</p>
<p>Have you ever sought advice from a financial adviser or financial planner? If so, how did you find the experience and would you do so again?</p>
<p>Share your thoughts in the comments.</p>
<p><em>To find out more information, visit<strong> <a href="http://moneyrules.com.au/" target="_blank"><span style="text-decoration: underline;">Nobby Kleinman's site here</span></a>.</strong></em></p>
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