Thought it might be worth sharing a few points here about why financial planning is important as we approach some major changes. The changes (i.e. my escape plan) are the culmination of plans made many years ago and are now coming into effect, albeit a little sooner than we had anticipated. Having a few long term goals is a good thing to do, although at times it can become very easy to simply drift through life in a haphazard way.
We are feeling grateful that we actively sought and took some advice many years ago; we have broadly stuck to the advice all through our marriage. Even before we were married we discussed money and this is an important thing to do. In relationships generally, just think how many squabbles there are over money? We have never argued about money. So in those early days we had some discussions around money; not just how much we had (not much!) but more importantly the kind of lifestyle we wanted to lead. The pressing question was about defining our values and attitudes towards money.
Taking proper advice in conjunction with knowing our own attitudes towards money was important and we have benefitted from this over the years. We remember the advisor asking us questions about whether we wanted children and how would we provide for them if something serious happened. What kind of lifestyle did we want, what was our attitude towards investment risks? What was our attitude towards borrowing money, for mortgages, loans and so on? Did we want to give some money away over the years? As the years progressed, conversations around inheritance planning, retirement, protection against poor health became more pertinent.
What kind of an advisor did we want?
A very visible source of financial advice is from the bank, where you have your current account. It is easily available and free, although internet based banks maybe less approachable in this regard. Banks will certainly have a code they follow which is probably very fancy sounding and supposedly “customer focussed” but you might question their impartiality. You could go even further and say they’re simply sales people with targets to achieve.
An alternative is an Independent Financial Advisor; there are loads around and choosing one can be daunting. We would recommend you assess them against each other and possibly interview them, to take the lead and don’t let them bamboozle you with their charms, complements and small talk.
We had chosen an Independent Financial Advisor and have stuck with them over the years. That’s through the ups and downs of our own finances, the 2008 crash and the many years which have passed. There is something to be said for letting your advisor come to know you well, so they can advise you well through knowing what is important to you.
There is a cost to the advice
Financial advisors will recover their costs in different ways – commissions from the financial products, annual fees and so on. This is for you to weigh up in terms of its cost-effectiveness.
Like us, you might even find yourself buying an insurance product which you didn’t plan to buy and this can also, loosely, fall into the cost of having an Independent Financial Advisor.
An example of this is the Critical Illness cover we both have. We took the policies out, one for each of us, when we first got married back in the last century. The policy has a long list of illnesses and health issues which could prevent you from working and needing extra care. The policy would then pay out upon diagnosis of a serious illness. We get a periodic review where we agree the cost against the cover, since as we get older the business risk for the insurance company increases all the time.
This policy alone has cost us quite a lot over the years, in fact I think I could buy a very nice upmarket car with the money we have spent on the cover! However, we have had comforting peace-of-mind cover as we raised our children, sent them to school and are now supporting them through college and university. However, I have always thought of the monthly critical illness payment as being like my invoice for continued good health!
Another “cost” is getting into the habit of saving. Without a plan it is so easy not to save as there are always plenty of other things in life which you can spend your money on. It has to be said we have gone through a few lean years when we haven’t been able to save anything at all, which is okay providing you know what you’re doing and are keeping an eye on the bigger, longer term picture.
A possible cost is actually losing money and by that I mean through investments. Investments, as we are often reminded, may rise in value or perhaps fall. This can seriously test you. When you get a statement and find the money you invested a year ago has halved in value and I remember thinking a few times how I’d simply pushed the money “under the mattress”so to speak. This does happen from time to time and if your advisor has done a good job, they will have arranged a balanced investment, so not all of your money is in one place – as one fund falls, another should rise.
Our suggestion is…..
Depending what stage you’re at in life, financial planning is important. There is a strong argument for having an advisor alongside at the start of a career i.e. in your early twenties. This can help get you into the right habit of saving a little each month and planning for your future.
For ourselves, having an annual meeting with our advisor is like having an annual MOT on our finances and yet it goes further. In my mind I am checking our direction in life, whether we have the right balance of things and whether we are maintaining our values and beliefs through the way we are conducting our financial affairs. It is so helpful as it is not just about the figures on a spreadsheet.
Please don’t think having an Independent Financial Advisor is only for the wealthy or rich as that’s not true. We are ordinary people. However, an advisor can help you pull together dreams, aspirations and goals which otherwise could simply remain in your head and never become a reality. It has to be said, some Independent Financial Advisors will deliberately align themselves to people who already have money but choosing wisely should lead to finding one who can help you from the start.
We can, by the way, highly recommend our own bunch of advisors in Trinity Wealth Management, based in St Albans in Hertfordshire.
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