Do I need guidance or advice?

Whether you’re seeking sage wisdom or wise counsel, or – as it’s known in the financial world – guidance and advice – you need to know what you’re asking for. And it’s sometimes a fine line: asking a passing walker for directions to the next river crossing is a lot different to asking them whether the old ford has flooded and if they believe it’s sensible to cross there. And then, after they look you up and down, eyeing up the considerable cast iron frying pan attached to your already bulging backpack with which you plan on cooking tonight’s dinner, they might suggest you find a bridge further downstream to save the trouble.

So, which is which? One supplies you with information, giving you the tools you need to make decisions; whereas one provides researched, informed suggestions that would help you based on your personal circumstances.

So, if you want guidance about how much you should contribute to your pension, someone might – for instance – explain to you how contributions work, and what you can do to get the best out of them. It’s then down to you to decide how to do that.

But if you wanted advice? Well, you’d ask a qualified, expert financial adviser. They’d look at your income and overall circumstances, in order to work out how much you could afford to save with your current living expenses. They’d consider what kind of pension fund you’re contributing to. They’d provide options based on all that information – and more – to ensure you could make a confident, informed and proactive decision about what to do with your money.

Crucially, guidance is usually free – and it can be a great first step to taking more control of your finances. Whereas financial advice isn’t free, but it could help you to avoid expensive mistakes.

A guide to guidance

As we’ve said, guidance is not personalised. It won’t provide recommendations or suggestions. It’s just information, and what you do with that information is up to you.

If you’re looking for guidance, then you might not need to look further than Pension Wise. It’s a service from MoneyHelper, that provides free impartial services from the UK Government for more information on pensions.

If you book an appointment with Pension Wise, you can expect to cover a few different topics, including what to look out for and consider when thinking about your retirement choices and getting a low-down on all of the options available. You might get a tax breakdown of those options, and any implications to be wary of. You could even be warned about scams, and how to protect yourself and your future. Guidance could even cover the next steps you might take on your journey to retirement.

An introduction to advice

By contrast, financial advice is not free. That’s because it’s detailed, personalised, and provided by an expert financial adviser, and whilst it can set you back in the short term, financial advice could help to ensure you won’t pay for making misinformed, rash financial decisions in the future.

At Pension Awareness, we never provide financial advice. There’s a reason you’ll often see and hear us point you towards finding a financial adviser: some decisions (like taking your pension in retirement or investment choices) can feel pretty overwhelming with so many options from the simple to the complex to the downright bamboozling. And we don’t know your personal circumstances.

What to know when searching for advice

Firstly, financial advice is accessible.

If you’re in the market for a new financial advisor, you can visit MoneyHelper, where you’ll be able to find the right one for you.

A financial adviser could help you with things such as:

• Planning retirement
• Whether to invest, and in what
• Saving techniques
• Making the most of a lump sum payment
• Buying property and mortgages
• For big life changes

Effectively, they’ll be advising you to make the most of your money.

What kind of financial adviser do I need?

Financial advisers come in two forms:

• Independent financial advisers (IFAs), who will provide financial advice about different products and services across the whole marketplace.
• Restricted advisers, who might only give advice in one area of expertise, or they’ll provide limited advice based on a small selection of products, services or companies.

How much does a financial adviser cost?

The question you’ve been waiting for. And for good reason. After all, you want to make sure what you pay is worth it. Adviser fees will depend on many things, such as the complexity of your needs, the size of asset involved, how much time it will take, etc. They may also vary from adviser to adviser, so you should shop around to get the best deal.

Before you go ahead, your adviser must be clear about their fees and agree with you in advance how you’ll pay them.

Can I trust them?

Yes. But you should make sure whoever is providing you with advice is qualified and registered with the Financial Conduct Authority (FCA). You can check this against the Financial Services Register.

What’s more, all financial advisers should have both:

• A level 4 or above of the National Qualifications and Credit Framework.
• A Statement of Professional Standing (SPS), an annual certificate stating that the advisor completes at least 35 hours of work each year, and has signed up to a code of ethics. A bit like the Hippocratic oath.

Choosing between financial advice and guidance depends on what you’re looking for, what financial goals you have, and even how much you can afford to spend.

So if you’re thinking about taking a more analytical approach to your finances, you’ve got all the info, titbits, and, well, guidance, you need to choose between guidance and advice.