IC3 was specifically formed to help improve the financial capability of citizens throughout the UK, which has been widely acknowledged by various surveys and studies, to be in need of enhancement.
Financial capability – which is the overall aim of financial guidance – consists of various functions that allows an individual to make significant advancements with their financial development. It will help you:
- Improve financial resilience
- Gain knowledge about financial products and how to apply key financial concepts
- Clearly see how your finances should be structured for progression
- Build confidence with financial management and make clear financial decisions
Financial guidance is relevant for people of all ages, but particularly important for those starting or within 5 years of their working life/career. This is because at this stage is when an individual will often have low expenses and will be more receptive to learning about implementing good financial habits. Financial guidance is separate and specifically distinct from financial advice, having a wider scope of need, but which also supports the usefulness of advice. It fits into the UK financial offering as follows:
Top Level
Wealth Management:
Management of, usually, a high-net worth individual’s finances, whom often have complex financial arrangements regarding portfolio management, taxation, business ownership and estate planning.
Mid-Level
Financial Advice:
Largely advising on financial products that a person has acquired, or would like to acquire (such as mortgages), providing helpful planning and personally recommended advice on which financial decisions to take, specific to their circumstances, that will meet their goals. Certain execution and management services are also available.
Base Level
Financial Guidance:
Development of a person’s financial capability, helping them understand what actions could help them progress financially and why. Enhancing their financial knowledge and supporting their progression are two key functions.
Support Level
Debt Management Services:
Vital services provided to help restore financial security to individuals
It is important to fully recognise that the area in which financial guidance focuses (financial capability) is a key area of financial offering. With it, those requiring Debt Management Services would potentially not require them as they would have developed suitable knowledge and understanding in the importance of budgeting, saving, and investing and the various other products and actions needed to progress their financial position and help avoid mistakes, problems, and even financial scams.
Conversely, with an estimated 20 million UK adults not being able to manage their own finances, and around half of these with £100 or less in savings (FinCap, 2022) many are not in a financial position to benefit from Wealth Management and Financial Advice Services. As valuable as both of these services are for those requiring them, an individual could save themself much in fees were they able to implement some of the functions they pay advisors to do, or if being advised, they would already have a greater understanding of the relevance of why and what an advisor is actually recommending. Therefore, it can be seen that quality financial guidance is a significant part of the financial offering, and many more people should focus on developing their financial capability as a basic principle.
To find out more about the differences between financial advice and financial guidance, see the financial guidance page on our website, or you can visit the Financial Conduct Authority’s (FCA) website at www.fca.org.uk.
Before you click on IC3’s Financial Guidance Page to discover more about financial guidance, how it will help you and how it will be delivered, try these short questions to help you understand the concept of financial guidance:
What is compound interest...? – and why is it so important...?
Answer: Some commonly refer to it as (which is not quite accurate) interest on interest. Simple interest is interest on a principal amount. Compound interest is interest on a principal amount, plus on the interest it has earned. Compound interest will be one of your main tools for financial development, exponentially allowing your investments to grow
What is one example of how a Flexible ISA can help you with your investment plans...?
Answer: Cash can be taken out to exploit other investment opportunities, and then replaced within the same tax year without affecting that year’s allowance
What legislative protections do consumers have when making purchases via Credit Card…?
Answer: Protections under the Consumer Credit Act 1974/2006 – Section 75. This is key legislation for helping you receive a refund if you do not receive what you have paid for.
What does the term diversification mean, when investing...?
Answer: Essentially investing in varying financial products, markets, securities, etc. – not placing all of your resources in one area increases your chances of receiving returns, and reduces risk
