The differences between coaching, financial advice and financial planning explained – and what’s best for whom…

Help with deciding your financial affairs is available from an ever greater variety of sources – and is sought by a growing number of savers.

If you have a complex set of financial arrangements, and large sums are involved, then you might be prepared to pay a bit more for some in-depth and ongoing financial advice. In contrast, if you are a young saver who just wants some guidance in the world of saving and investing, then a coaching lesson might be all you need.

And in some places coaching is available for free. [1]

Jason Hollands, managing director of online investing platform Bestinvest says: ‘It is often noted that there is an “advice gap” in the UK between wealthier people who can afford personalised financial advice and those with more modest savings who do not have access to professional advice or perceive it to be too costly for them - even though they do not have total confidence in their choices and decisions.’

Bestinvest has sought to close that gap by launching free, person-to-person investment coaching, which is easily booked on the DIY investing platform – but also by offering fixed price one-off advice packages for a little as £295. [2]

But what exactly is the difference between coaching and advice – and then where does financial planning come in?

Coaching

Coaching is about providing education and guidance to empower people to make better investment or financial decisions. A coach can help people understand the options available to them and the things they should consider.

Hollands says: ‘Coaching is typically aimed at those whose finances are not so complex, a group of people who have historically been underserved by the financial advice industry. While a lot of information and opinion is available online – and among social media influencers or down the pub – the plethora of voices can be overwhelming, confusing and sometimes misleading. So coaches aim to cut through the fog with clear, best-practice guidance.’

One-off coaching sessions in specific areas can sometimes be accessed for free – as they are on the Bestinvest platform. But financial coaches are emerging to provide a paid-for service, just like personal fitness trainers.

They charge by time or for a number of sessions, but will typically kick off with a short, free introductory consultation that will establish your situation and your goals and needs. Some pointers on areas like budgeting and saving, investing, pensions or mortgages may be given here.

Subsequent paid-for sessions can help people build their own financial plan or focus on certain aspects of personal finance to improve knowledge of the options available and arm the client with the knowledge to make good choices.

An important formal difference between coaches and financial advisers is that coaches are typically not regulated to make personal recommendations as to which investments or other financial products are suitable for an individual – although some financial coaches might also be qualified advisers.

So in an area like investing, a coach will explain concepts like risk and return, diversification, and asset allocation, and how the different options of investment products on the market work – but they cannot recommend specific products.

Savers using the Bestinvest investing platform can request free personal coaching sessions, and the coaches there are qualified financial advisers.

Financial advice

If coaches offering investment guidance help you understand what you could do, then financial advice recommends what you should do. Financial advisers are regulated by the Financial Conduct Authority and provide personalised advice on how to manage your money, and which products are best suited to your specific situation and objectives.

To check if an adviser is authorised, you can consult the FCA’s Financial Services Register, and you should also look at its warning list to make sure there are no red flags against their name.

Financial advice can be given in just one area - like investments, pensions, tax planning, insurance and mortgages - or across the range of one’s finances. Although such an in-depth and ongoing relationship is often termed ‘financial planning’ (see below).

Providers of advice are responsible and liable for the accuracy, quality and suitability of the recommendations that they make, and to an extent you are protected by regulation. This does not mean that if, for instance, a recommended investment product performs poorly that the adviser is liable. However, it does mean that if you can show you have been poorly advised and were recommended a product that was not suitable then there might be some recompense.

Costs depend on an adviser’s fees. These can be up to 3% of the value of any investments being made and then between 0.5 per cent and 1 per cent of the value per annum on an ongoing. But advisers can also charge by the hour. There will also be fees on the funds they recommend for your portfolio.

Financial planning

There is a lot of cross-over between financial advice and financial planning, but a financial planner tends to cover your entire financial life to help develop a long-term plan.

Financial planners will help you identify your goals and figure out the best ways to achieve them. This will often involve building a long-term cash flow model, to forecast future financial needs and whether any savings and investments will be sufficient to cover them.

A financial plan will almost always include a strategy for funding retirement, tax efficiency, protection to provide for you and your family in the event of ill-health or death, and inheritance planning.

Planning involves ongoing financial advice and planners will often include some behavioural guidance, for instance advising clients if they are tempted to make precipitate decisions during times of financial stress and uncertainty - for instance, stock market crashes or a divorce.

The focus is on long-term goals and planning rather than financial advice on specific areas or products, although the latter can be part and parcel of the service.

Hollands concludes: ‘Many savers and investors can labour away under misapprehensions that prevent them from making the optimum decisions and choices. It might be just the case that they need a bit of coaching to clarify how to achieve best practice.

‘But there also many people out there grappling with a more challenging array of financial commitments who could benefit from seeking an adviser or planner to get their affairs straightened out - particularly when it comes to complex areas like pensions and tax and inheritance planning.’

NOTES

[1] For instance, the free coaching sessions available to Bestinvest customs via the online platform. Virtual meetings with the coaches can be booked online, with the option of completing a digital fact find and risk assessment questionnaire to streamline the coaching discussion.

https://www.bestinvest.co.uk/our-service/bestinvest-plus

[2] There are two fully regulated financial advice packages. A Portfolio Health Check – in which an investment adviser examines your investments and makes recommendations – comes at a fixed price of £495 (inclusive of VAT). Meanwhile, the Investing for Your Goals option will recommend a suitable ready-made portfolio, or an asset allocation if the client wishes to make their own fund selections, at a fixed cost of just £295 (inclusive of VAT). Following the purchase of either of these advice packages there will be no commitment to further purchases or to an ongoing advice relationship.

https://www.bestinvest.co.uk/coming-soon