Determining whether your financial advice is fit for purpose.
In the sixth of Russell’s blogs, he talks about the value of Financial Planning.
A blog from Russell Skinner, APFS CFP™ Chartered FCSI (Financial Planning)
Chartered Financial Planner and Managing Director of Blue Sky Financial Planning
We all know there is a huge difference between the cost of something and its perceived value.
The internet is a great resource, but as many of us know when it comes to one’s health, self-diagnosis can be problematic. It’s the same with financial matters.
Then there are family, friends and work colleagues who are not shy in giving their views or repeating something they have heard in the media or from their own trusted people. Well-meaning as they may be, they are only passing comments with limited knowledge and experience.
Gary, our CEO, has often been heard to quip “why pay for professional advice when amateur advice is free”?
We accept there is nothing worse than paying good money for something, then being disappointed with the outcome. It is, therefore, vital before committing to any relationship with a financial adviser that you understand the benefits to you and your family of real financial planning.
What’s more, you need to understand the commitment of the advisory/planning company too.
At times, prospective new clients have asked us if they can speak to a couple of our existing clients. We ask them to choose two separate letters of the alphabet and we put them in touch with existing clients whose surnames begin with the chosen letters. Hearing it ‘from the horse’s mouth’ gives great reassurance!
The circle of cause and effect
We strongly believe in modelling various financial scenarios to understand what is possible for clients, and the probable cause and effect of certain financial actions.
In some cases, what appears to be a sensible and obvious next step/decision, can have a detrimental effect on other aspects of one’s future planning. Making a series of short-term decisions based on immediate needs can often result in unforeseen consequences. Increasing the likelihood, for example, of your beneficiaries paying more inheritance tax. This is the value of proper financial planning.
We frequently come across the financial DIY’ers; those who have attended to their own needs. Just like when doing work in one’s own home, if it’s a straightforward job then no worries. The problem comes with more complicated work, and if the DIY’er reaches beyond their skill set and understanding… disastrous consequences await!
This is when valuable expertise is required.
We cannot guarantee that everyone will have these, but it is quite a common occurrence in our business to hear clients say they’ve had a eureka moment – particularly around retirement. We have countless examples of clients being emotionally overwhelmed on the realisation that they CAN afford to retire, much earlier than they ever imagined. Especially the case if they don’t like their jobs anymore, or they have suffered from a health scare.
We want clients to enjoy their money whilst they are in good health.
The secret to eureka moments is to know your number; how much do you need and when, to live the life you want.
The problem is that most people simply continue as they are on the treadmill of life, conditioned to what life has brought them. If you like, they have a fixed mindset. At Blue Sky we encourage clients to have a growth mindset whereby we ask them to dream about what’s possible to live a fulfilling life.
Your number, in the context of the above, will change each year in accordance with a whole manner of variables, on a personal level, on an investment market level, economic dynamics, or regarding matters such as taxation. It is therefore important to know that your financial planning is always fit for purpose. If there are challenges, at least you know about them, allowing you to respond accordingly.
Value comes when you are sure your financial plan is fit for purpose.
Measuring your progress
Financial Planning helps you evaluate whether you are likely to meet your financial goals without any undue concerns. Many people we speak to, before they become clients, have an array of investments and pensions with several companies. Understandable, because our lives often have twists and turns. To boot, companies change their name, people change their jobs, and advisers move on to pastures new.
We ask every new client who has an existing portfolio if they know their number… nobody ever does!
We ask every new client what their annualised return has been over the last year, and across varying periods… nobody knows this either!
Most have a feel for what has happened, they are emotionally connected as to whether elements of their portfolio seem to have performed well or not. In fact, their emotions can simply be dictated by the timing of the up-to-date valuation from their various providers. A time difference of just a month can give a skewed impression, especially in times of stock market volatility.
Every Blue Sky client knows their number. At their annual reviews, they are provided with a graph with three lines. One demonstrating an assumption of a 4% annual return after fees, one being the return required to ensure that they never run out of money, and the other being the actual return they have achieved. Ideally this is the top line on the graph.
This methodology means each client is increasing their chances of financial success and improving their independence. Most importantly, whilst money alone doesn’t bring happiness, managed properly it affords us all greater choice.
Value comes from improved knowledge and more choices.
More about Blue Sky Financial Planning
Here at Blue Sky, we are an independent financial planning firm with registered IFAs and wealth managers within our employed team. Regulated by the FCA with an impeccable reputation for client services and no upheld complaints, we thrive on making our clients’ hopes and dreams come true. We take a holistic approach wherever possible and only recommend products and services that will serve the end goals of the clients. You can learn more about the Essence of Blue Sky here.