Making the right choices about your pensions, especially when you retire is really hard for anyone to do on their own. Thankfully, there are a number of ways you can get help! But, what will each give you and most importantly what is best for you?
Most people, who don’t work in finance, have no idea of the difference between advice, guidance and coaching. Why should they and it’s not made clear at all!
We will explain each, the pros and cons and which one suits different people best.
Advice
Sometimes you simply must get advice. For example, if you want to transfer a final salary pension scheme (we have a specialist journey for that here, ask us if you want a code) or take some money from equity release (more on that coming soon!).
In most other retirement situations advice is just a choice, but if done well, it’s the Rolls Royce option.
An adviser will do everything for you, get to understand more about you and your finances and then give you a clear recommendation on what to do.
There are two main types of advice – initial and ongoing.
What will initial advice will give you?
- An initial plan to try to ensure you get what you need, don’t run out of money, or overpay tax
- A starting investment strategy, suitable for you, that aims to get the growth you need
- The recommended mix of cash, guaranteed (annuity) and non guaranteed (drawdown) income
- A recommended provider (drawdown) or insurer (annuity) to use
Ongoing advice will then make sure you stay on track each year and recommend any changes needed.
How much does advice typically cost?
Initial advice can cost a percentage of your pot and some times it is a fixed fee.
You can probably expect to pay around £1,000-£4,000 for advice on a £200,000 pension pot depending on the advice needed. This is around 0.5%-2% of the pot.
If your pot is smaller, the percentage may be larger if a fixed fee. For larger pots, it may seem better value if a fixed fee.
On large pots you can end up paying considerable amounts (£10,000 plus) if there is a percentage based fee with no cap.
Ongoing advice is a smaller percentage cost, usually between 0.4%-1% of your pot each year. To be clear, you don’t have to take ongoing advice, if you are happy to, you can manage things yourself after taking initial advice.
Upsides of advice
- Everything is managed for you, data entry, form filing, investment updates, tax and plan monitoring
- Advice is completely specific to your situation, risk appetite, tax situation, dependents
- Advice considers every choice available, assuming it is whole of market advice
- You get clear recommendations on what to do
- You have a right of complaint, and perhaps compensation, if ever badly advised
Downsides of advice
- Like anything great, it comes at a cost
- This can seem more expensive for people with smaller pots
- It may not be viable for those with the smallest pots
Advice is the best option for everyone who can afford it and it does seem better value for money for those with larger pots.
For those who don’t want to manage things themselves, have complex tax issues, or want clear recommendations from an expert, it really is the only option.
Finding good advice
Finding a trusted, experienced financial adviser can be difficult. We, along with our compliance consultant, Compliance Cubed, undertake checks on any advisers we signpost so that we can say we think they will act in your best interests without any conflicts. Most “find an adviser” type sites do not do this.
We have recently welcomed a new adviser partner, HUB Financial Solutions. We chose them as they have a low fixed fee for initial advice and competitive costs of ongoing advice, more details here. This offers great value, especially for those with larger pots. If this may be of interest, you can set up an initial no obligation meeting here at no cost.
Guidance
No one knows exactly what guidance is! It is just anything which is not advice!
It is what we do. We help people as much as we can without giving advice. That means we can’t tell you what options to take, where to invest and so on. We do the sums for you, tell you the rules and show you the choices and options available. It is then your choice as to which option to take.
What can our guidance do?
- Provide you with the tools so you can build, test, track and update a plan yourself
- Allow you to look at options such as guaranteed income or equity release in your plan
- Show you how splitting income between savings and pension pots can lower income tax
- Compare provider charges in pound terms based on your plan
- Help providers improve their default funds, so they are tailored to your plan within their products
Upsides of guidance
- It’s free (well ours is anyway)
- Anyone can get it, no matter what your pot size is
- It can provide many of the background numbers and information you need that advice does
Downsides of guidance
- You need at least some basic financial know how and must be prepared to do some legwork yourself
- Our guidance is all online, not face to face, although we are always happy to answer questions
- You must make any final decisions yourself
- There is no right to complaint or compensation
For people already happy to manage their own finances, solely using guidance tools platforms and journeys like ours, without advice, may be a great free alternative.
Coaching
Financial coaching has become more popular in recent years. The overall aim of coaching is to inform and educate, empowering you to make your own decisions.
As an comparison, by being taught how to use certain tools and learning some basic DIY, you can do many things around the house yourself, without the need to call in an expert.
What can financial coaching do?
- Teach you the basics of pensions (and other finance)
- Help you get some understanding of more complex issues such as tax, investments etc
- Show you how to get the most from free guidance tools like ours
- Empower you to make your own decisions
Upsides of coaching
- By being taught what you need to know, you can make better decisions yourself in future
- It is available to anyone
- Options can be explained and questions answered clearly to you
- It can substantially reduce costs compared to taking advice if you need some help
Downsides of coaching
- There is some cost involved (typically £500 to £750)
- You must make any final decisions yourself
- There is no right of complaint or compensation
Coaching is a great option for those who would like to make their own decisions, but need some initial face to face education on both the subject and the tools which are available to help.
Coaching works very well alongside guidance tools like ours. When used together, if this provides everything you need and you are happy to make your own decisions, it will cost a lot less than taking advice.
Finding good coaching
We work with Dianne Sullivan, who is a qualified finance coach and uses Guiide with her clients showing people how to make the best use out of it.
We have asked her to make videos for us (like the pension basics one in our homepage) and she has many others on more complicated areas on her own video channel.
Dianne offers pension coaching services for people with any size pension pots. If this may help, you can book a free 30 minute session to chat through what you are looking for at no cost, or obligation via this link.
Disclaimer – We do not receive any one off referral fees from any of the partners on our site. Some partners may license the rights to use our technology, or we may have other long term commercial relationships with them but we do not receive any additional payment should you choose one.
