Would you benefit from personalised advice that could help you to grow your savings or reduce your debt burden? Have your finances suddenly become more complicated as the result of a new job or an unexpected inheritance? Have you come to a junction in managing your personal finances such that you need financial guidance that extends beyond the result of a simple Google search? 

The majority of people will need financial guidance at least once in their lives. Amongst this vast group of people, some will benefit from making a one-off investment in obtaining financial help, while others will benefit from seeking continual advice. Unbiased and independent financial guidance from an experienced professional can be a gamechanger if you are struggling to meet your financial goals or you are facing a big financial decision. A good rule of thumb is that you should seek financial help once you have done your own research and financial planning but want more specialised guidance and cannot proceed any further on your own.

So how do you discover what your own advice needs may be? And who should you go to for help? This article looks at the distinction between financial advisers, money coaches and wealth managers: who can help you to manage your money to align with your financial goals and who is accredited to do what.

Overview of the differences

At a high level, the key difference between financial advisers and financial coaches is that financial advisers must be authorised by the Financial Conduct Authority (FCA) in the UK in order to recommend specific financial products to their clients; financial coaches are not as qualified and are not authorised to recommend any specific investment products. 

Wealth managers are a subset of financial advisors. The definition of financial advisory is incredibly broad. The type of advice given by the professional can help to determine the distinction between a financial adviser and a wealth manager. According to the Financial Conduct Authority (FCA), a wealth manager is a professional that manages a customer’s money on either a discretionary or an advisory basis.

• Discretionary wealth management consists of the client passing the responsibility of managing their finances to a wealth manager. The wealth manager will then make investment decisions on their client’s behalf to help them to achieve their financial goals.

• Advisory wealth management consists of the wealth manager making recommendations based on their client’s financial goals but will, crucially, always defer to their client before taking action.

It is also possible to differentiate between a standard financial advisor and wealth manager by looking to their clientele: typically, wealth managers will serve high-net-worth individuals, whereas anyone can go to a financial advisor providing that they can afford the fees associated with the service.

Financial advisers

A financial advisor is a highly qualified professional who helps their clients on a wide range of financial services.

There are two types of financial advisers: independent (IFAs) or restricted. When 'independent', advisers can give 'independent advice' and can advise products from any provider right across the market, i.e. more choice. It’s usually best to work with an independent financial adviser.

They play a crucial role in helping their clients to manage and invest their money in order to achieve their financial goals. Such goals may be short-term in nature, such as reducing debt or budgeting, or they may be long-term in nature, such as saving for retirement. The mark of a good financial adviser is one who can help their clients to understand why they have recommended a particular investment or strategy to align with their goals. The tasks of a financial adviser include: 

•  Analysing their client’s financial information to prepare a customised plan that helps them to reach their financial goals

• Researching financial markets to get a grasp on new and existing products, potential investment opportunities and changes in financial regulation

• Preparing annual reports to inform clients of their progress towards their financial goals

By how much will a financial adviser set me back?

Again, the cost of a financial adviser can really vary depending on the depth of analysis required and the level of experience that the financial adviser has. This could mean spending anything from £500 for a basic financial plan to £5,000 if you want something that is in depth and specific. Some financial advisers will then charge a percentage of your investment returns in the form of fees, which usually range from 1% to 5%. It is always a good idea to attend a free consultation to discuss your needs with a financial advisor before committing! We also found this interesting article from Unbiased about the cost of financial advice and how independent financial advisor fees pay for themselves. 

Financial coaches

Financial coaches are individuals who guide their clients through making financial decisions without recommending specific products. They are not regulated by the FCA. A financial coach will work closely alongside clients to understand their financial goals, motivations and concerns, thereby enabling them to personalise guidance regarding specific financial situations. 

Because financial coaches are not qualified to recommend specific financial products, they instead help to educate, motivate and empower their clients by providing them with an arsenal of tools that can help them when solving future financial problems. This can mean:

• Discussing their client’s situation and financial goals

• Working on establishing a better money mindset

• Creating realistic financial plans

• Drawing up a flexible budget for their clients

By how much will a financial coach set me back?

The cost of a financial coach, like all services, will vary. However, in general, the cost of a financial coach will be less than that of a financial advisor or a wealth manager. Financial coaches typically charge a single and transparent flat fee, which should be discussed in a consultation prior to embarking on coaching. On average, this fee will range from £50 - £500 per hour, depending on the experience that the financial coach has. They usually also offer group coaching sessions that can be very valuable if you’d like to work with people who have similar challenges and objectives as you do.

Wealth managers

While a financial advisor might touch base with their clients a few times each year, a wealth manager is expected to provide a more hands-on approach when offering financial advice. Wealth managers are charged with enhancing their client’s financial position, which can come in various forms depending on the existing financial situation of their client and the goals they hope to achieve in the future. Wealth managers have expertise in a wide range of financial products and services, including, but not limited to, estate planning, asset management and investing. A collection of clients’ accounts is called a portfolio, and wealth managers must carefully manage their portfolios in order to evaluate their clients’ comprehensive financial situations and make recommendations accordingly. Unlike financial coaches or financial advisors, wealth managers do not assist their clients with basic financial services like budgeting or cash flow planning (but often work with financial advisers or financial planners). Instead, typical tasks of wealth managers are:

• Communicating frequently with their clients regarding portfolio performance, changes and potential opportunities

• Gaining an in-depth understanding of financial regulations that will impact their client portfolios

• Performing comprehensive risk assessments to protect and de-risk their clients’ assets

An important distinction to consider when it comes to wealth managers is that there is usually a minimum asset requirement for opening an account with them. For example, to open an account with Morgan Stanley Private Wealth Management, you must have a minimum of £250,000 in assets to work with.  

By how much will a wealth manager set me back?

Once again, the cost of a wealth manager will vary! Wealth managers can charge a flat hourly fee for their services and, if they are managing an investment portfolio on their client’s behalf, a percentage of the client’s balance, known as the asset under management (AUM) fee. Charges are often made in a tiered format, such that the greater the value of assets under management, the lower the percentage fee – the AUM fee typically ranges from 0.5% - 1.5%. 

General housekeeping

When it comes to seeking professional financial help, never underestimate the importance of rapport. Whether you decide to go to a financial coach, financial advisor or wealth manager for guidance, it is key that there exists the potential for a good working relationship. The discussion and management of personal finances is an intimate part of many people’s lives and, therefore, by having a person on board that has the capacity to understand your needs when helping you to reach your goals is a massive advantage. Free initial consultations and personal recommendations can be a great way to discover whether this potential exists!