Informed Choice is a firm of Independent Financial Planners. How is that different from Independent Financial Advisers?
I have been pondering this question because the financial services sector interchangeably uses the terms.
For us, Financial Planning is a valuable process that leads to suitable financial advice.
That advice, by the way, can be “don’t do anything” and that inaction can be as valuable as “invest in an ISA or pension plan”.
There are, in my experience, four broad stages in creating and implementing a financial plan, and I have just made the acronym DEPE (pronounced Deep) to describe those stages.
D is Discover.
This part of the process looks at finding out everything about a person’s existing financial position: their income, their expenditure and their assets and liabilities.
Financial planning encompasses everything about a person’s financial position because it’s not possible to look in isolation at just one aspect of a person’s finances. For example, how they should invest their ISA monies.
Discovery helps us to do some joined-up thinking when we get round to creating their financial plan.
E is for Explore.
Explore is more about the person than their money. It’s about answering the essential questions.
“When can I afford to retire and what will I be retiring to?” Can I have the life that I want in the future without running out of money?
Well, to answer that question, we need to have a detailed description of what that life might look like.
Exploring what people want from life is just as important in financial planning as asking questions about their finances.
P is for Plan.
A plan isn’t a thing that is permanently fixed. It can change, evolve, over time.
Circumstances change and life has this habit of throwing unexpected things at us.
So a plan is a starting point it needs to be updated and to respond to those life-changing moments.
But, it is much harder to respond to change if you don’t have a plan in place, that is called “drifting.”
E is for Enjoy.
The whole point of a financial plan is to gain an understanding of what might be possible.
We have some genuinely brilliant examples of the things that people have done with their lives as a result of the confidence they have received through the financial planning process; moving home, travel, early retirement amongst many other things.
So if you haven’t already done so, maybe now is the time for a DEPE dive into your financial future.