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Our ultimate guide to financial planning

As humans we aren't great at self-care, so it is no surprise we all struggle managing our own money. We cover the role of a financial adviser, how the industry works, what worries people have when seeking advice, cognitive biases and how financial coaching impacts on your mental wellbeing.

What is Financial Planning? The Unividual Guide

Offering financial advice to our clients is a privilege we don’t take lightly. When we meet with clients we are friendly and approachable but behind the scenes we are all very serious about getting our advice exactly right for each unique individual. This guide looks at some of the factors we consider and how we approach our work.

Everyone you speak to has a slightly different take on what financial advice means. Some think they don’t need it, others think it isn’t right for them and some think that the process will be scary. We’ve written this guide to show how we approach a financial planning consultation and some of the ways we look out for our clients, and their needs, as individuals or businesses.

To start with, feel reassured that no one wakes up one morning and decides to get a financial adviser. Often a person may reach a key milestone in their life which leads to them seeking out advice from a professional. Such as

–   Retiring or wanting to exit a business

–   Wanting to invest or save money to reach goals

–   Maximising a lump sum from inheritance or redundancy

–   Buying a property or needing protection on a mortgage

–   Personal tax and business taxation

–   How to deal with a family death or plan for your own

–   Having children and protecting family from ill health

–   Starting up or buying in to a business or purchasing shares

Independent Vs Restricted Advice

One of the common themes we see is people are worried about the type of advice they will get, how it is paid for and what the qualifications are of the adviser.

Financial advice comes from one of two main types:

  1. Independent: Independent advice means the adviser may offer financial products or services from any provider.
  2. Restricted: Also known as quality-assured, offers products or services from an audited panel of product providers

A financial adviser should always make it clear what type of financial advice they offer.

Independent is a positive word in the English language, where as the word “restricted” sounds negative itself. However, this causes a common misconception, restricted advice is a good choice for a client looking for more of a holistic planning service or an adviser the coaches more.

This is to do with how the adviser spends their time behind the scenes. Having identified a need, an independent adviser spends most of their time looking at all the products on the market, of which there are hundreds of thousands.  Meanwhile, a restricted adviser can spend more time coaching and educating, actively matching the specific needs of the client with a group of well-performing products and services that are regularly vetted by a panel of professionals. Depending on the firm you choose this can offer better value for money as the costs of advice don’t drastically vary much between firms. This is a bit like walking in to a supermarket and instead of a shelf with thousands of different types of jam from different brands, a supermarket would assess the best range of jams through a quality assured process.

This ability to focus on our clients’ specific situations and needs, building relationships along the way, is why Unividual have taken the restricted advice route and can provide a 5 star service.

What should you look for in a financial adviser?

Financial advisers also need to be appropriately qualified, the minimum qualification required is a Diploma in Financial Planning. This can take around 6 to 12 months for a student to achieve. Instead at Unividual, we have our own in-house academy and we take three years to train our advisers up to Chartered and then some even go on to become a Fellow. On top of that, as a firm, Unividual was first awarded chartered financial planner status in 2015. It takes a lot of work to gain financial adviser qualifications, so when clients ask to see our certificates we’re proud to show them off! Have a look at our team of experts to find a financial adviser who suits your needs.

It isn’t just about qualifications though, a Unividual adviser learns about empathy, coaching and relationships very early on. We see a client as more than just a set of financial needs, you are a person with a unique situation and journey you want to go on through life’s ups and downs.  To achieve this our advisers take into account things like where you are now and where you want to be, your family plans and how you want your career to turn out. We also understand that not everyone has children or wants to get married, we do not put our clients in to stereotypical boxes. By digging down into the small details we get a chance to make a real difference to your finances.

Through building a complex picture of our clients, we also get to know them really well, clients often feel their adviser is literally part of the family.  Ofcourse this does mean we get a lot of wedding and celebratory party invites, so it helps we are a sociable bunch too!

Things that put people off financial advice

Don’t worry about your age

Our clients come to us at all stages of their life and for all sorts of reasons. We always say: it’s never too early or late for financial advice, but the sooner you start the more reward you will reap. We have clients that have just turned 18 and others that have never had an adviser and need to organise their pension. Don’t worry about what has happened and why you haven’t sought out advice, just pick up the phone and get started.

You don’t have to be rich

While it’s usually the big changes in people’s lives, like partnership or marriage, getting a mortgage or retirement that spur people to come and see us, often the smaller things can be the straw that breaks the camel’s back. Sometimes people are just feeling a little worried about money and need an expert to talk it over with. One of the biggest reasons people don’t seek advice is because they think “I haven’t got enough money“. We are not like other firms, we don’t stipulate that you have to have a certain amount of money before we work with you.

Don’t worry about not knowing anything

Our advisers will start by getting a good understanding of where you are right now. No questions are silly and we don’t judge people for what they do or don’t know about themselves or their finances. Then, we’ll look at what your priorities are and what plans you’ve got for the future. If you don’t know what those are either, don’t worry, part of our service is to have the coaching skills to help you realise this.  Once we’ve got to grips with that, we’ll start to look at the various ways you can improve and manage your money so that you can focus on your goals.

You don’t need “all your paperwork”

Part of the benefit of financial advice is to take the administrative worries out of managing your finances. Many things make up your ‘financial foundations’. We will get from you a rough idea of your income, expenses, assets, savings and investments, among other things, which will help us build a good picture of where you stand. We will then be able to write off to your product providers to gain permission to get all your information so that you don’t need to get any of that to us.

I don’t want to be told what to do

We work with a lot of people who hold senior positions and are used to feeling in charge, are mature clients that don’t appreciate being patronised or people who have managed their own finances for years. We have always taken the approach that we don’t tell you what to do with your money. We educate you on all the options, yes this might cost us more in time, but the result is you feel empowered and in control of your own decision making.

We also help you with the “unknown unknowns”. These are areas of advice like tax legislation, retirement law, estate planning and other technical areas where a real expert can see the wood for the trees, but to you, it just looks like tangled undergrowth!

Why managing money is important for your mental health

Let’s face it, money can be a real stress. Sometimes, no matter how careful you are, you run into unexpected situations where money becomes a factor. This worry can lead to real mental health issues so it’s important to tackle this subject head-on.

Podcast Mentally Yours worked with Toluna for a survey of 1000 UK adults. 77% were stressed about money, with 17% being ‘very stressed’. 1 in 5 even said they were scared to check their bank account.

This type of pressure can build and build until the weight on your shoulders is so heavy that you don’t know where to start.

We want to avoid situations like this at all costs. But it can be hard to sort your money issues out, especially as money is not usually taught on the school curriculum and even if it was, that probably feels like a long time ago.

It’s no wonder it’s so difficult when you consider how our brains are wired. We’ve got all sorts of instincts and biases, known as ‘cognitive biases’, that make managing money a tricky proposition. Our advisers understand that managing money is tricky and build strategies accounting for these subconscious mental processes when working with clients.

Steering you through cognitive biases

As humans our brains are faced with natural cognitive biases that affect the financial decisions we make. It is important to be aware of them because they impact on how we spend and save money. Part of the coaching we give clients is to listen out for these issues so we can steer them away from these biased decisions when it’s not in their best interest.

Decoy Effect

There is bias surrounding how we choose between a group of options. When people have a choice between a small or large coffee they will often pick the one that most closely meets their needs. The decoy comes in if a third choice is added, like a medium coffee. Their choice leans towards the more expensive option. This impacts on how we spend our money and our disposable income, which some people see as their savings pot, often depleted due to buying more than they need.

Time Discounting

It is human tendency to value something more in the present than in the future. People are more likely to take £100 upfront than £50 a month for 3 months, even though the latter offers someone an extra £50. This has a massive impact on people’s approach to savings, especially for things like retirement in the future.

Endowment Effect

We tend to put a higher value on things we own, over and above the value of that item if we didn’t own it.  This means people tend to pay to retain things even if they wouldn’t necessarily pay to have it if they didn’t own it. This is the main reason why investors stick with certain unprofitable assets, like property for example or something they inherited, the prospect of divesting at the prevailing market value does not meet their perceptions of its value.

Fear of Missing Out

There’s even an acronym for it: FOMO. When faced with the prospect that someone else is getting a better deal, or the use of a service or product made them successful, we feel like we are missing out. This creates in imbalance in our psychological safety.  Be aware of social influencers and the impact social media and advertising has on what you buy. Always wait before purchasing something to see if the novelty has warn off and really think about whether you need it before you make that purchase. Don’t forget an influencer may have got that item for free so the return on investment or value will be calculated differently for them as you might calculate it for yourself.

The Less-Is-Better Effect

We tend to place value on goods at the upper end of their value scale. For example most people would value a high quality £45 scarf, over a low quality coat that cost £60. Or an overfilled ice cream serving in a small 200ml cup is valued more highly than an underfilled serving in a 250ml cup. The amount is the same, but we value it disproportionately. We can use these biases to reframe some of our thinking.

Mental Accounting

We tend to divide money into separate “mental accounts” based on very subjective reasons instead of using sensible, objective sections like amount, risk or interest costs. An example of this could be saving for a holiday in your current account, while carrying some excess debt on a credit card? Even though the interest rate on the credit card is far more than on the current account, our instinct is to ignore that because we are emotionally connected to the idea of going on holiday.

Not quite ready for financial freedom?

Even if you’re not seeking financial advice at the moment, it’s a good idea to assess your current financial situation. We always advocate doing a personal financial check-up each year and throughout the year, there are a few things you can do to keep things smooth on the money front.

1.    ‘No brainer’ money tasks: These are the tasks you know you should be doing, but aren’t! Get the best deals on everyday costs like energy, insurance and credit facilities. Look at recurring costs, like that dusty gym membership, and ask if you need them. Make sure you don’t have money in places where it’s not really working for you.

2.    Make small adjustments: There are little things that don’t seem to matter much until you realise they add up to bigger savings like, quitting smoking or cutting down on expensive food items, walking rather than buying a bus fare, taking your own lunch to work three times a week, rather than buying a meal deal. Saving £10 a week is £40 a month, which is £480 a year. Give it 10 years or so and you could afford an amazing £5000 holiday!

3.    False assumptions: We all put things to the back of our minds to worry about another day. We assume our pension is totally under control or our retirement plans are “just going to work out”. You think “I’ll be able to afford to pay off my credit card debt next year”. Without a plan it won’t happen and you will just procrastinate, kicking the can further and further down the road. If you aren’t going to talk to an expert you need to make sure you research finance and money management to get clued up on ‘things you didn’t even know, you didn’t know’.

4.   Something needs to be done: We work hard to reach our goals and enjoy our life. If we don’t put in the hours to manage our money to achieve this, we waste all the hard work we put in to our job or business. You either need to be your own financial adviser and spend the time on it or outsource your money management to a professional. None of us are great at self-care so not only is a professional more experienced and knowledgeable but you will have someone taking care of you in a much better way than you take care of yourself. Plus you get to spend your time on what you do best, whether that’s is working to make more money, enjoying hobbies or time with friends and family. If you don’t do either of those things you are literally pushing water up a hill and success will come much harder to you. You don’t want to look back in 20/30/40 years time, when you will have to use a financial adviser anyway when you retire, and think “I wish I had done that sooner”.

We hope after reading this guide you’re feeling more comfortable about approaching an expert for financial advice and we would be happy to help answer any questions you may have. Sometimes we need practical examples that relate to us as individuals so head over to our case studies to read up on some true life examples of how a financial adviser has helped different types of people. After that, when you are ready to get in touch, we like to build up that trusting relationship by offering people a free, no obligation first meeting.  Every client is different so it is a time where we can listen to your unique situation, answer questions and explain how the cost of our services works. So, if financial advice is something you feel like you’d benefit from, no matter how big or small your questions are, we’d be delighted to talk it through with you.

Author & Editor: Cherie-Anne Baxter

Date of publication: 17/09/2021

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