I'd like to introduce you to Steve*. He's in his mid-30s and when I first met him, he'd recently been promoted to junior partner in a local law firm and his daughter Daisy had been born a few months previously.
(I know some of you are short on time, so before I tell you more about Steve, here's my key point: it's really important to know the difference between Financial Advice and Financial Planning. Both are important, but they are really different. Understanding that difference will help you make a much better decision around how to manage your money and who is best placed to help you.)
Right, back to Steve.
Becoming a Partner was a big deal for him, but his biggest news by far was the safe arrival of his daughter, Daisy. It might sound like a cliché, but becoming a Dad really shifted his life priorities and ambitions.
Before Daisy (or 'BD' as Steve said), he'd happily admit that life was focussed on 2 things: 'me' and 'now'. Life with Daisy is different. It's chaotic, tiring (Daisy's not been a great sleeper) and wonderful, all at the same time.
Steve recently said to me, "Life has really changed - my focus is on my wife and daughter now, not on myself. I'm thinking much more about the future too, asking questions like, "What kind of life do I want to provide for my little girl?".
If you are a parent, then this will sound familiar. It was these sort of questions that led Steve to search for some financial advice.
"I realised that we'd got into the habit of living month to month, spending most of our earnings as we went."
He continued, "When I was promoted, I had thought of trying to save the extra salary I got, but it never quite happened. I guess we just spent it instead. When I discovered that, I knew I needed someone to help us think more clearly and strategically about our family finances."
His first step was to ask his Dad, George. His parents weren't wealthy, but they did have various small life policies and pensions they had accumulated over the years. George's advice was,
"Find a financial advisor - they'll tell you what you need to do".
Steve asked if he had anyone in mind. George replied: "Not really. We used different people at different times, depending on their speciality. For example, when we did our loft conversion, I just used a local broker to help me remortgage. Or when your Mum needed to start a private pension, I found a local pensions guy who helped us choose the right one."
It seemed to Steve that if he knew what financial product he needed, then it was simply a case of finding someone (ideally local) who could help him select the right product from the market and get it set up.
Steve's problem was that he didn't know. Not really.
He had a pension, but was it the right one? What about the mortgage? They'd bought their house a few years previously, and it suited them as a couple, but it had started to feel a bit cramped now it was filling up with baby stuff. Could they afford a new home? Was it wise to do that now, or start saving (or investing?) for a future move?
So Steve started by searching Google for "financial advisor". But the results were overwhelming. "It was like walking into a large room packed with people all trying to get my attention by shouting at me..."
If you google "financial advice", you'll see what Steve means.
So next, he asked around, but most of his peers hadn't much to add. They had pensions through their employers. Some were actively building up their ISA savings. Some budgeted, some didn't. Almost all of them had some kind of credit card debt.
All of them had ambitions for the future, but it seemed that none of them really had a handle on how to make the finances work to turn those longer-term ambitions into reality.
In the end, it was thanks to a chat with one of the senior partners at his work that I got to meet Steve. Their advice to him was: "You don't need a product. You need a plan!"
Now before I finish this story, let me be clear. I am not criticising the traditional financial advice model, which has a specific product focus.
It can be really helpful to talk to a product specialist, or simply have someone who can help you quickly sort out an immediate financial need you have. In fact, my own financial planning team has its own go-to specialists who we use regularly.
What I am saying is that financial planning is not the same thing as one-off, time-specific or product-specific financial advice.
OK. Let's go back to Steve for one last time.
When I met Steve, he shared his whole story with me: the job promotion, the new baby, his questions about the house, about their long term future, and a number of other things. I also got Steve and his wife to document their current income and outgoings, and to describe and cost out some of their future ambitions.
Understanding a new client's current financial reality and future ambitions is the first step of a good financial planning process. A good financial planner will start with you, not with a product. They will ask probing questions like "what does retirement mean to you? " as opposed to just asking "how much income do you need in retirement?".
I also helped Steve and his wife define their 'attitude towards risk' (which we review with clients every year). A client's risk measure plays an important role in shaping the financial plan we create and will influence how they meet their desired goals.
Once we helped create the financial roadmap that Steve and his wife were both comfortable with, we got to work, turning their plan into a reality. We helped them get into the habit of regular budgeting. We maximised their tax-free savings and streamlined their pension provision. We also made sure they had adequate protection in the event of death or disability including up to date Wills and started a number of new longer-term investments for them too. It was at this point that financial products became more the focus of our discussion.
That was five years ago.
Since our first discussion, I've got to know Steve and his wife much better. Earlier this year, we toasted the arrival of Mia, Daisy's little sister. And because having 2 kids really did make their home feel cramped, we connected them with our go-to Mortgage advisor who has helped them buy a bigger family home.
Having long-term relationships with clients is one of the big reasons I chose to become a financial planner in the first place. I'm proud that we are still working with some of our founding clients, 22 years later.
And the moral of the story?
If you need help in the short term choosing a financial product to meet a specific need, then a good financial advisor will save you time and stress by helping you navigate the increasingly complex array of products on offer.
But if you want help making your money work for you over your lifetime and wish to understand what "your number is" to be financially secure and enable you to live the life you really want, then talk to a financial planner.
*I've changed the names in this story, but the story itself is based on real clients I have had the privilege of serving in recent years.
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