Investment advice versus financial planning

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What’s the difference and which do you need to succeed?

There are many things in our world that go together. For example: Exams and Stress. Good Times and Friends. Puppies and Happiness. While Investment Advice and Financial Planning complement each other well, they have differences that are often misunderstood and may cause confusion. Investment advice is a targeted and specific form of guidance such as investment allocation or an insurance review. A financial plan is a broader, more comprehensive document that can help uncover areas of financial concern and be used as a roadmap to reach your financial goals.

What is Investment Advice?

Investment advice is provided by an individual who is licensed to provide advice on a specific topic or area. This could be an Investment Advisor Representative (“advisor”) who is able to charge a fee for managing investments. In this scenario, the client gives their investments to an advisor to manage for an annual fee (typically 1-2%). The advisor may ask the client to take a risk questionnaire to determine what types of investments and will also take into consideration how long until they will need to use those funds (called time horizon). The goal of working with an investment advisor is to have the advisor grow the investments over the long-run so that you’re able to use them for a future goal (paying off debt, children’s education, retirement, passing wealth onto the next generation, etc.).

What is a Financial Plan?

A financial plan is a document that is created to project and protect your savings, and select the appropriate steps to build a better financial picture. A financial plan typically costs a flat fee ranging from $1,000-$10,000 depending on complexity of the situation (although our team currently charges $1,300). It is constructed, reviewed, and delivered by a professional appointed with a Registered Investment Adviser firm to provide financial planning. Many of these professionals hold the CERTIFIED FINANCIAL PLANNER™ (CFP ®) mark. Within a financial plan, recommendations can include: debt management, budgeting techniques, better funding techniques for goals, insurance or investments review, tax reduction technique, and more. When the plan is delivered, the financial planner does not have to be the person to implement it or manage the client’s assets; the client has received the recommendations and can choose whether to execute them or not with whomever they wish.

Which is best for me?

For most people, both financial planning and investment advice are beneficial. In order to begin achieving your financial goals, it helps to create a financial plan that can help identify assets, liabilities, and cash flow. By working with a financial planner to build a plan, you can begin to take the correct steps to make progress towards your goals. A financial plan may need to be updated periodically when big life changes occur (getting married, changing jobs, beginning a family, etc). The updated plan will re-prioritize your goals with your new situation. Part of the plan may include recommendations for how to better allocate retirement funds or rebalance your overall investment portfolio. This is where investment advice can help you make the right choices based on the time frame around the portfolio and how risky you are as an investor.

Now what do I do?

Relax, take a breath. We know that managing your personal finances can be stressful, but we’re here to guide you every step of the way. By reading this article you have already taken the first step towards becoming financially independent and achieving your goals. The next step is a conversation. Use the button to the right to request a no obligation conversation with a professional to discuss your needs. Don't want to wait? Give us a call and speak to a member of the John Hancock Advice team now - 888-955-5432.

At the end of the day, our goal is to help our clients make progress towards achieving their financial goals, while adjusting for life’s many twists and turns that may come along the way.

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