The world of personal finance can be complicated. Savings, pensions, investments, it’s enough to make your head spin.
Unless you work in the finance industry, it’s easy to feel lost. That’s why many people seek out professionals to help them. Many people believe that financial advice and financial guidance are one and the same, but they are very different. It’s important to know this difference so you can get the right information at the right time.
So What’s the Difference between Financial Advice and Guidance?
The Financial Conduct Authority (FCA), describes ‘financial advice’ as the recommendation of a specific, product, service or course of action. Financial guidance is the process of providing options and information to consumers, so that they may make their own choices.
Depending on your particular circumstances, you might choose financial guidance or financial advice.
Financial Guidance - A Closer Look
If you are in the early stages of planning your finances or retirement plans, you might want a run down of the financial landscape. The person providing your financial guidance can give you a broad overview of the market.
The information given is extremely broad and is not necessarily tailored to your individual circumstances.
If you are nearing retirement, you are entitled to receive guidance free of charge under the Guidance Guarantee scheme.
Guidance can be provided by a number of different people and is usually unregulated by the FCA. However, companies such as Portafina and individuals that are regulated can also give financial guidance.
Financial Advice - A Closer Look
When you feel that you are ready to take specific steps, financial advice can be tailored to your individual circumstances.
A financial adviser will talk to you about your goals and financial situation. They will then recommend particular financial products and services to you, explaining the benefits and risks of these recommendations.
Look for a financial advisor regulated by the FCA. If you lose money due to incorrect advice, you can appeal to the Financial Ombudsman Service.
Depending on the financial adviser you choose, you may be charged a fee up front or only pay if you take their advice on the financial products they recommend.
When choosing a financial adviser, look for someone who is regulated. It is likely that you will use this person for many years, so it’s particularly important to find someone that you can form a trusting relationship with.
When it comes to your financial planning, both guidance and advice have a role to play in your decision making process. When you are in the initial stages of planning, or you have a limited knowledge of your financial options, then guidance is particularly useful for providing you with that initial overview of the sector.
When you are ready to start making decisions, then good financial advice is priceless as it is tailored to your needs and goals. Choose a regulated adviser and you have protection against bad advice or unfair practices.
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