Fact Sheet: Types of Financial Advice

If you’re looking to get some financial advice, it’s important you know what sort of advice you’re looking for. If you don’t, you won’t get the right outcomes from the advice process. You may not solve the issues or get the results you want. You can also waste a bunch of time, and become frustrated as you go through the process.

When you’re clear on the sort of advice you want or need, you’ll get a better outcome from your advice process, save time and frustration, and ultimately give yourself a much better chance of getting the financial results that are important to you.

I put together this fact sheet to help you understand the different types of advice so you know what to look for when seeking financial advice.

Sometimes you might need to get advice for a specific area, and other times you might be looking for overall advice to get the most out of your entire situation. It’s critical to understand the difference, and to know what sort of advice you want or need before you start looking.

For example, imagine you have saved or inherited $50k and just want an adviser to help you build an investment strategy for this money and not look at the rest of your situation. This very specific need would result in ‘specific advice’, or sometimes called ‘scaled advice’.

The alternative option is broader in scope. You might have $50k that you want to do something smart with, but you want to confirm what investment strategy is best and how this fits with your broader financial strategy. This is called ‘comprehensive advice’ or ‘comprehensive planning’.

The difference between the two can sometimes seem small, but there is an enormous difference in the output. Understanding this difference is the first step in getting the outcomes you want from Financial Advice.

In the case of specific advice, your adviser is only helping you invest money. If you ask an Adviser for this type of advice, they will let you know their advice is limited to only how best to invest your money and isn’t considering any other aspect of your financial situation. What this means is your adviser isn’t advising whether investing is the very best thing to be doing with your money, they aren’t reviewing your plans to invest relative to your other goals, and your adviser isn’t exploring whether investing this money might generate risks in your life.

In the second instance, your Adviser is helping with your investment plan as part of your overall financial and lifestyle strategy. Comprehensive Advice means:

• Your Adviser is required to gather a full understanding of your overall financial situation
• Your Adviser will explore if investing is the very best thing to do with this money
• Your Advice is not only limited to investing your money, but covers investing as part of your overall strategy and will help you understand the implications of your investment
• Your Adviser is obligated to raise any issues, risks, roadblocks, or potential problems with your investment strategy in reference to your other targets or goals
• Your Adviser will discuss any opportunities or issues in other areas of your financial situation (outside of your investment strategy) and help you understand how you can take advantage of these opportunities

To me, specific advice has it’s place. It’s best when you are 100% sure a particular strategy is the very best thing for you to be doing, but you need some help to execute.

I think the outcome of comprehensive advice should be to help you set up a clear and easy to follow plan from where you are today, to the money and lifestyle outcomes you want. Comprehensive Advice will be more detailed and need more inputs, takes a little longer to put together, and costs more, but it goes further to helping you actually achieve your money goals.

I feel comprehensive advice is more suitable for those with less financial knowledge or understanding, where they might not know what all the options are for them. If this sounds like you, I think it’s important for you to take the time to explore your options so you can decide which specific path is going to be the right one for you. This will give you more confidence in the direction you’re taking and mean you’re more likely to stick to your strategy because you know it’s the best one for you to be taking.

Your overall plan should drive the specific strategies you follow or investments you make, not the other way around.

Make sure you get clear on the type of advice you want before you start the process. This will drive the sort of Adviser or Advice firm you seek out, and will help you ask the right questions so that the Adviser you choose will be the right one to help with the things you want help with. I’ve seen a bunch of people that have gone seeking comprehensive Advice, only to be lead down the path of getting specific advice that doesn’t consider their strategy as part of the bigger picture.

When you sit down with an Adviser, if you want comprehensive Advice, tell them! Ask the question whether they will be excluding anything from your advice (sometimes called ‘scoping’) and let them know you want to explore everything that could be relevant to helping you get more out of your current financial situation.