Help is always, for lack of a better word….helpful.
Whether it’s in the form of holding the door open for someone struggling with their suitcase, proofreading an important document, or helping them paint over their bathroom, only the most stubborn of people would turn away a helping hand if it were offered to them.
Indeed, all forms of help can offer value to someone. But value can differ depending on the type of help.
Take, for example, the difference between advice and guidance. Both can be incredibly valuable in helping someone understand their options as they approach retirement and make more informed financial decisions.
That said, it is a widely held assumption that they can offer people the exact same form of value.
And this is a bit of a misrepresentation…
What’s the difference?
Before delving into the details, it’s important to understand exactly what the differences between the two are.
Firstly, guidance is free, unbiased information which is available to anyone who wants it. One of the best examples, within the context of retirement planning, is the Government’s Pension Wise website. This website is free to access and provides clear, impartial information about a variety of retirement related subjects, from the types of products available to what to do if you’re concerned about money.
Advice, on the other hand, is tailored to the individual. So, when an adviser discusses any retirement finance options, it’s always in relation to what suits you – both your future goals and your current circumstances.
Further, advice is regulated by the Financial Conduct Authority. This means that all qualified advisers must adhere to the standard and if they fall below (i.e. give unsuitable advice), they must answer to the regulator and, following investigation. They must also repay the client with any loses they experienced as a result of the unsuitable advice; and this extra layer of security can be very valuable for clients.
The key difference is that guidance outlines what you ‘could’ do to bolster your retirement plans, whilst advice outlines what you ‘should’ do; guidance is generic and general, whilst regulated advice is tailored specifically to you.
Where’s the value?
Whilst different, both guidance and advice do present different forms of value.
Guidance is a great educational tool. It can help people get to grips with the various retirement options available to them, and develop a strong foundational knowledge of retirement. And this knowledge can contribute to making more informed decisions. And given that it is free, it is understandable that people do see the value it can offer.
However, this generic information is as far as it can go. Advice, arguably goes that step further.
Advice helps people to understand all products and routes to retirement in relation to them. The recommendation is completely personal and tailored to their needs. So, for example, they might recommend a flexible access drawdown, if you value flexibility to decide how much money you want to withdraw, when you want it. Alternatively, if you feel security is more important, they might recommend an annuity.
Advice can also help you to manage the amount of risk you take on in your retirement plan. Understanding and managing risk is a critical aspect of financial planning. An adviser will work closely with you to assess your risk appetite (how much you are willing and able to lose, should investments not perform how you want) and develop personalised strategies to mitigate potential risks. Whether it’s market volatility, economic downturns, or unexpected life events, an adviser will help you navigate uncertainties and make adjustments to your retirement plan as necessary.
The cost of value
Of course, we must address the elephant in the room…guidance is free, whilst advice is not. And this is arguably why many people consider guidance to be the cheaper alternative to advice.
As this blog has outlined, there are too many stark differences between the two to consider guidance as an alternative. Whilst advice does come at a price, the value it can provide; such as tailored recommendations, personalised explanations, and ongoing support to help you achieve your retirement goals – makes it worthwhile!
Additionally, there has been a long-held assumption that advice is only for wealthy people. This is not the case. In reality, there are affordable advice options available, which means people can access that expert insight, without taking a massive financial hit.
For example, we at My Pension Expert, are always exploring methods to ensure we can provide the highest quality service, at the most cost-effective price for the client. We ensure our clients understand all the fees before agreeing to proceed with our advice.
We believe that no one should be priced out of achieving the retirement they want.
Both guidance and advice offer a great deal of value. However, it is important to remember the key differences between the two. Guidance is a valuable educational tool, and a strong starting point in your retirement journey.
However, there is no substitute for the tailored support offered by regulated independent financial advice. We believe advice can offer real, long-term value to help you retire with confidence and achieve the retirement you want and deserve! If you’re curious about how advice can help you, why not get in touch, and speak to a member of the My Pension Expert team today!