5 Key Differences between a Lifestyle Financial Planner and a Broker

Lifestyle Financial Planner vs Broker
Posted On 2020-09-06 Author: Client Care

5 Key Differences between a Lifestyle Financial Planner and a Broker

One of our aims at Client Care is to equip clients with the knowledge they need to make informed and considered financial decisions. We spend a lot of time coaching clients in financial matters as well as guiding them through lifestyle and behavioural choices. These added benefits are important factors in the service we provide as lifestyle financial planners. But, many people do not quite know what the difference is between a planner and a broker, so here are the 5 key differences between the two.

Lifestyle Financial Planner Qualities

1 – Salary vs Sales Commission

It’s important to remember that a lifestyle financial planner earns a fixed salary. This means that their pay at the end of the month does not depend on how many policies they sold or how many new clients they signed up. Like many other professions, their salaries depend on qualifications and their years of experience (more on those qualifications later).

On the other hand, brokers are dependent on high sales volumes in order to earn commissions – so, more sales mean more money for Mr. Broker. Unfortunately, this drive for more sales can lead to brokers pushing products that may not be entirely necessary for clients at the time.

As a client, you’ll need to bear in mind that a broker is really hoping to sell you a product, but a financial planner is working with you to find solutions and usually has your best interests at heart.

2 – Long-term Planning vs Insurance-based Solutions

The second key point to understanding the difference between financial planners and brokers is to look at the long-term vs short-term solutions being offered. Lifestyle financial planning is all about identifying your long-term lifestyle goals and finding financial ways to enable you to reach those goals. Your financial planner is helping you on the journey to building your dream lifestyle and always has your goals in mind when selecting products for you – those products are a means to an end i.e. reaching your goals!

Contrary to this, brokers usually offer a “quick-fix” solution in terms of an insurance product without considering your overall financial goals. Remember the sales-driven commission we mentioned in point 1? Without the planning part, you will end with multiple policies that are not giving you insight into the big picture.

Working with a financial planner will allow you to choose products based on the benefits they provide to reaching your life goals, not just on solving short-term insurance challenges.

3 – Relational vs Transactional

As we mentioned above, at Client Care we spend a lot of time with our clients. Before we get started on a financial plan, we make sure we understand your dreams, goals, and where you are in life. We want to know where you are and how you got there by asking questions about past. Our focus is on building long-term relationships with our clients and we often end up working with clients for many, many years – some for over 20 years! This relational nature of our work is important in delivering the right solutions for our clients throughout all of life’s stages.

Brokers, on the other hand, have a more transactional relationship with their clients. Because they are not helping you plan for future life events like saving up for a family trip, they don’t really need to get to know you or how you live your life. Brokers will present you with a product (usually one that is from the company where they work) without considering your broader financial situation.
Ensuring that you know the person helping you with your finances – and that they know you – is an important step in reaching your financial goals.

4 – Solutions vs Products

Not all financial challenges can be solved with a product. Sometimes, you might just need someone to get you back on track with that budget you set up at the start of the year but forgot to stick to. Or maybe it’s worth driving your car a little longer instead of buying a new one in order to pay off your mortgage sooner. These types of solutions are where we as lifestyle financial planners can really provide values to our clients. We are here to coach and mentor you into the lifestyle you want, as well as advise you on financial matters.

Unfortunately, Brokers are not able to provide this type of solutions-based thinking. Their aim is to sell a product, not help you solve problems in a strategic way.

We always advocate for clients to work with a financial planner to reach specific life goals and to make sure that the solutions offered will work for your unique needs. It’s about finding a solution best suited to you, not adding another product to your portfolio.

Broker Qualities

5 – CFP® Qualified Professional vs Salesperson Trained In-House

When working with a financial planner with the CFP® designation, you can rest assured that they adhere to very strict standards of practice. In order to become a CFP®, planners are judged on four criteria: education, experience, examination, and ethics. You can find out more about the process here, but suffice it to say that this qualification has a very high standard.

This qualification sets lifestyle financial planners apart from brokers in a very clear way, as most brokers only need a driving licence and a matric certificate to get started (if you do a quick online search for “financial adviser jobs” you’ll see what we mean). Brokers are also often tied to one company, receive in-house training there, and then sell products from that one service provider.

Most CFP®’s get into this industry with a mindset to help others understand personal finance. At Client Care, we accomplish this by providing coaching and financial education to all of our clients.

If you’re looking to make a change in your finances, you’ll need a planner – not a broker – to guide you through the financial journey.

Get in touch: info@clientcare.co.za

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