10 Oct 2024

Investment: What is Financial Planning?

In each newsletter, and also on our social media posts, we’ll look to highlight and briefly explore a concept in Investments or Finance.

Financial Planning is often a misunderstood service: so this month, we’ll look at what independent financial planning actually means.

There are a number of terms bandied about, admittedly some of them even rather derogatory, about people and businesses who work with individuals and their personal finances. This is partly because there are, and unfortunately always will be, charlatans who abuse their positions for purely self-serving ends.

As a result, financial services is now a highly regulated industry, and the Financial Conduct Authority has a register of all those who are authorised to work in this space. Those who watch someone dance on TikTok while telling them how to invest, should heed the proverbial words about fools and their money soon being parted.

Originally, many advisers were salesmen of policies provided by insurance and other large financial firms – they were paid by commissions on policy sales, and this created some potentially significant incentives to sell policies even to those for whom they might not be appropriate. In 2013 such commissions were banned, and the industry shifted to a model based on fees paid by customers to those giving them personalised advice.

Financial Advisers, sometimes called IFA’s, many with their roots among these salesmen of the past, have tended to be product-focused: finding clients to suit particular types or styles of investment, and charging fees for placing clients in those investments. Some of this service has been replaced by online DIY offerings for those who know exactly what they want. Chasing previous years’ best performing funds, or having hot stock tips or a ‘nose’ for the best investments, has at times been a common sales patter among these advisers.

The reality is that only a handful ofpeople have proven themselves consistently able to beat the rest of the market, and they were fund managers not advisers, and a) many of these high conviction funds don’t invite members of the public to invest, and b) it’s often still not clear how much of their success was luck as opposed to genuine knowledge.

By contrast, Financial Planning (sometimes also called ‘Lifestyle Financial Planning’ or ‘Holistic Financial Planning’) seeks to understand the wider circumstances of a person’s life, and then to explore with them, various different solutions that may help them to enunciate and then achieve their goals and objectives. Sometimes the real work is in helping a person see the wood they’ve been missing for the trees, rather than just selling them the first thing they ask for.

In Financial Planning, the process is one of building understanding of both the concrete facts of a client’s life:

• age
• location
• career
• health
• family members
• income and expenditure
• assets and liabilities

And also the softer details that shape motive and objectives:

• what does their future life look like – what are their career and personal aspirations
• how do they choose to prioritise among competing needs and desires?
• how do they feel about sharing wealth with family vs enjoying the fruits of their labours?
• what is worrying them most?

All of this helps to arrive at a nuanced view of the best possible answers or range of answers for each person, couple, family, or business owner(s).

An important note here is the difference between independent and other advisers. Hoe Bridge Wealth are proud to be an independent firm – this means that we genuinely represent our clients when it comes to choosing platforms (a.k.a. custodians of your money – we never hold client funds) as well as investment portfolios and funds – of which there are many thousands of providers with differing styles and philosophies. We have our own in-house investment philosophy based on long-term investment horizons, and we use this to help us steer clients in their investment journey.

This independence may often not be the case with many of the largest national or publicly listed organisations in the industry, where the underlying service providers and investment or fund managers are very frequently part of the same organisation, or indeed where private equity investors are driving vertical alignment to derive greater overall profits.

For the unknowing, this means an adviser may have an unresolved conflict of interest between what’s best for their clients, and what’s best for their employer. When you visit a fancy office, work with a team with many layers of staff, see adverts on television or in national newspapers, or receive correspondence on gilded paper, someone is paying for that – and usually it’s the clients of that firm. See here for recent press coverage on this issue.

Please do reach out to us, or feel free to suggest Hoe Bridge Wealth to any family, friend or colleague who is not sure if they’re getting value for money from their current adviser – I’m always happy to chat, and word of mouth is often the best introduction.

Note: investments carry risk. The value of your investments (and any income from them) can go down as well as up, and you may not get back the full amount you invested.

Article updated Sep 2025