Financial Planning is all about Right Money, Right Time, Right Place. Professional advice, of any sort, should only be sort if the outcome is likely to be better than doing it alone.
- How do you make that judgement?
- You would seek advice if your own knowledge base is insufficient
- If the outcome matters sufficiently
- If the professional advice is to be trusted
It has become common practice for people to make their own Wills or prepare their own tax returns, and if your situation is simple enough and you have sufficient time and knowledge, that’s ok.
Its also now easier and popular to make your own investment decisions.
The availability on the internet to select funds and run your own portfolios or pensions is growing. I have several clients who want such hands on access, without the additional cost of advice. They just seek advice on the overall planning. Or they keep aside part of their capital to do their own thing, usually buying shares and running a portfolio for themselves.
One of the services we ran in Bristol was to offer legal and accountancy firms half day courses for their graduates on financial planning – not for their clients but for their employees. That was before the financial crash, when all professional firms were finding that their recruits were lacking the basic skills of money management. We offered the courses to support their HR people.
Financial Planning is about “Right money, Right place, Right time.”
What do you need to know to achieve this?
The foundation to ensure that the basics are secure,
Your essential income is covered.
Your mortgage and other loans are covered
That’s the foundation on which to build a plan.
The same applies whether you are a new business, an employee of a large corporate or are approaching retirement and beyond to having sufficient for your care needs.
Secure the essentials first.
Have a cash fund as a safety net.
Then we have a basis to build from. Which can either take the form of saving for the future or taking income from savings to live now. May be to fund a career break, pay university fees for the children or provide a retirement income.
Start this stage with:
- Clear targets, approximate time scale ; What do you want and when
- Asset allocation: over 90% of portfolio performance depends on this one element. So it is worth spending time getting it right.
- Different assets produce different outcomes at different times, so a mix is better than risking all in a single asset.
- Taxation once you allocate the assets in the right balance, check the best tax position for those assets. Different assets attract different tax, whether they are income producing and subject to income tax or subject to capital gains.
Some allowance to consider:
- Savings income,
- Pension tax relief, capital gains allowance,
- IHT allowance.
Do you have any personal values that need consideration: you may want to avoid certain things or positively choose to support a sector, such as green energy or water purification?
None of this is rocket science and given time and the right research you can certainly do it for yourself.
Review regularly. When you review, remember your original objectives, don’t allow yourself to be dissuaded from your original asset choices, keep the mix appropriate to your overall plan, tweek when necessary but NEVER follow the markets down.
Last year’s best performer is rarely this year’s best performer. Better to have a balanced of good performers.
For balance, here is an example of where a good Independent Financial Adviser can add value and provide better outcomes.
If at this stage you decide that your time is better spent on other things, then here is BBC Moneybox’s Paul Lewis guide to finding good financial advice.
Ask the three questions:
Are they Independent?
Are they prepared to discuss their fees transparently?
Are they Chartered?