Financial guidance or advice? How they differ and how to check a firm

Financial guidance explains how things work and what the options are, in general terms, and is free and impartial from services such as MoneyHelper and Pension Wise. Financial advice is personal: a firm authorised by the Financial Conduct Authority looks at your whole situation, gives you a personal view on what to do, is accountable under FCA rules, and is usually paid for. Life Cashflow is neither. It shows what a set of assumptions leads to.

What is the difference between guidance and advice?

The words are often used loosely, but in the UK they describe different services with different protections.

Where does Life Cashflow sit?

Neither of these. It is a modelling tool: you set the assumptions, it shows the arithmetic. It does not look at your wider circumstances, does not tell you what to do, and is not a regulated service. Treat its output as information.

Can you get financial advice for free?

Guidance is free; regulated advice is usually paid for. GOV.UK says of advice on workplace pensions that you will usually have to pay for it.

• MoneyHelper is the government-backed service for free, impartial money and pensions guidance, by phone, web chat and online.
• Pension Wise, part of MoneyHelper, gives free guidance appointments about the options for taking money from a defined contribution pension. They are for people aged 50 or over, and for some younger people, such as those retiring early because of ill health or with an inherited pension.
• Advice paid for in other ways. Some employers offer access to advice as part of their benefits. The pensions advice allowance lets members of defined contribution schemes take up to £500 tax-free from their pension towards retirement advice, once a tax year and up to three times, where the scheme allows it.

The planner itself points to Pension Wise. When someone in a plan is 50 or over and has a pension pot, the overview ends with this note.

When do people look for regulated advice?

People often look for regulated advice when a decision is large, hard to reverse, or complicated. Common examples are:

• Thinking about giving up a defined benefit (final salary) pension. In most cases the law requires advice first when the benefits are worth more than £30,000.
• Choosing how to draw an income from a defined contribution pension, where the choices can have lasting effects.
• Complicated tax positions, such as several rental properties, business income or income from abroad.
• Inheritance tax, gifts, trusts and passing on wealth.
• Paying for long-term care.
• Big life events, such as divorce, bereavement or receiving an inheritance.

Some people also simply prefer to talk their situation through with a professional. None of this means anyone needs advice. That depends on the person, and Life Cashflow cannot tell you.

What is the difference between independent and restricted advisers?

Advice firms describe themselves in one of two ways, and FCA rules require them to tell you which applies before they advise you.

• Independent. The firm considers a broad range of products from across the market and gives advice that is not limited or influenced by a provider.
• Restricted. The firm limits its advice in some way, for example to the products of one provider, a short list of providers, or certain types of product. It must say so.

Neither label says anything about the quality of the advice. Asking a firm to explain which applies to it, and what that means in practice, is a normal part of a first conversation.

What do people ask an adviser or firm?

• Are you independent or restricted, and what does that mean for the advice I would get?
• What will I pay, in pounds, for the first meeting, the advice itself, and any ongoing service? What does an ongoing fee cover?
• Do you receive payments from any provider or product, and how do you handle conflicts of interest?
• Which qualifications do the people I would deal with hold, and which FCA permissions does the firm have?
• What happens if I am unhappy? Who can I complain to?
• What will you need from me, and how often will we review things?

Which public resources help people check a firm or find free guidance?

These are public bodies and services, listed for convenience and in no order of preference. Life Cashflow is not connected with them, and listing them is not an endorsement of any firm they mention.

• MoneyHelper (opens in a new tab). The government-backed service for free, impartial money and pensions guidance, by phone, web chat and online.
• FCA Register (opens in a new tab). The official record of firms and individuals authorised by the Financial Conduct Authority, and what each is permitted to do.
• MoneyHelper: find a retirement adviser (opens in a new tab). A public directory of firms that give regulated retirement advice, run by the government-backed MoneyHelper service.
• MoneyHelper: choosing a financial adviser (opens in a new tab). A guide to the types of adviser, how they are paid, and what to ask before you start.
• Pension Wise (opens in a new tab). Free, impartial guidance appointments about the options for a defined contribution pension, for people aged 50 or over.
• FCA ScamSmart (opens in a new tab). The regulator's guide to spotting investment and pension scams, and its list of warnings about unauthorised firms.

The four steps further down this page show how people check a firm on the FCA Register.

What this looks like in the planner

The picture at the top of this page is the planner's overview for Sam, an invented example: whether spending is met, money to live on in the first year without work, net worth at the end of the plan and tax over the whole plan. Open Sam's example in the planner to see it, and change any figure to see the results move.

That is the arithmetic of the figures entered. It is not what an adviser would give. Regulated advice looks at a person's whole situation, such as their objectives, their attitude to risk, their health and their family, and the products and providers open to them, and gives a personal view on what to do, for which the firm is accountable. The planner does none of that. What the planner simplifies or leaves out lists the rest of what it does not know.

Can a Life Cashflow plan be used in a conversation with an adviser?

You can show your plan on screen, or share a saved plan file, with anyone you choose. We do not send plans to advisers and have no network of them. Whether a projection is useful to a particular adviser is for them to say. A projection built on your own assumptions is a set of questions to ask, not a conclusion.