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Financial advice or guidance: Is there a difference?

Investing can initially feel overwhelming – an overload of information and lots of jargon – all while your financial future is at stake.

Investing with little to no financial knowledge can be problematic. There are many different ways to invest that are catered to different needs which makes finding the right method crucial. A simple Google search of ‘how to invest’ will provide you with endless guidance and information on the matter that will help further your knowledge. Yet when it comes to sifting through this and deciding what is relevant, even those with some financial understanding are likely to struggle.

However, if explained by experts that want to help and offer you the right solutions, finance and investing can be enjoyable and especially beneficial. Is guidance alone enough to begin a wealth journey or should those interested in investing seek further advice?

Does it really matter whether you get advice or guidance when all you want is help? And is there really any difference between the two? Let’s take a look.

What is guidance?

The Oxford dictionary states that guidance is “advice or information aimed at resolving a problem or difficulty, especially as given by someone in authority”. Yet, when investing for the first time it can be hard to know where to look, leaving with you an overwhelming number of options.

Sometimes, guidance online isn’t regulated which means that there will be no redress if you make the wrong decision with your finances. Realistically, the information and guidance that you find for free may not apply to you so it could be worth seeking out ‘advice’ if you’re stuck on what to do.

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What is advice?

According to the Oxford dictionary, the definition of advice actually includes the word ‘guidance’. It states that advice is “guidance or recommendations offered with regard to prudent action,” while the Cambridge dictionary claims advice is “an opinion that someone offers you about what you should do or how you should act in a particular situation”.

The Financial Conduct Authority (FCA) has various levels of advice definitions. If a company wants to call themselves an independent financial adviser, they must provide unbiased and unrestricted advice based on a comprehensive and fair analysis of the market. At Moneyfarm we offer something called “restricted advice”, where we advise our customers which of our investment portfolios is best suited to them.

Whilst there is endless content available about ISAs, stocks, business investment and so on, finding information that applies to your financial situation is often hard to come by. However, with advice from experts, potential investors can find out what information applies to them whilst being advised to take certain steps that will maximise their wealth returns.

Due to restrictions outlined by the FCA, financial advisors will not tell you what to do with your finances but they will suggest an unbiased investment formula based on their expert knowledge that caters to your needs. All decisions will always be in your hands, but advice offered by experts will allow this decision to be well informed and stress free.

Does it really matter?

As long as those interested in investing are seeking help does it really matter whether its advice or guidance? Finance and investing can be complicated, especially when dealt with for the first time. It’s crucial that you know whether the solution you’re receiving is right for you, and, whilst there are many companies that offer guidance, sometimes advice can be more beneficial in the long term.

Photo by Fabrizio Conti on Unsplash

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