The dilemma for anyone looking to secure their financial future.
We all face a unique set of challenges in securing our own financial future. While we are working and our earnings are regular and possibly increasing, many of us will undoubtedly find that our outgoings and spending also increase. In short, our mortgage is larger, our car is more expensive, we go on more expensive holidays and in general spend an awful lot more on things than we did before.
Of course, everything is great while the money comes in. You may feel that you deserve to treat yourself for all the hours of hard work. But what if it all stopped tomorrow or, more importantly, what if you wanted it to stop but were afraid of losing your status? Building your career is one thing, but building your assets to create financial independence further down the line is equally important, even if you don’t think you need to right now. If you’re not creating financial independence now you could end up needing to work longer than you wanted to, or you’ll have to make some drastic lifestyle changes. It may not seem important now, but we promise you it will be and sooner than you think.
We’ve heard many stories over the years about high flyers who’ve achieved considerable success in their careers wanting to leave and change to something completely different. Some of the more savvy ones had thought ahead, making provisions along the way, so could easily leave the job they were in. Others who adopted the “work hard and play hard” mentality often found themselves having to stay in the job, continuing to work long after they wanted to. Thinking about planning your finances for your future when you’re busy is often the last thing on your mind, but it is possible to do both.
So how do you secure your financial future?
Simple: spend less than you earn!
You then capture a portion of your income and direct it to productive assets — the kind of assets that will generate capital growth over time. Rather than buying yet more stuff for the house or going out for another expensive meal every month, use your money to create real security and choice in the future.
This “throw some of it over the wall” method of consistently taking some of your earnings and putting them into a plan will help you create financial security and independence for when you need it.
This will probably make perfect sense to you and you may be forgiven for thinking that you could just take this advice and get on with it yourself. So how difficult can it be to sort your own finances?
The key point to consider here is objectivity. It is extremely hard for people to be objective about their own finances. You might not realise it but most of the decisions you have ever made about your money will have involved emotion. Which is why it’s essential to find someone who can look at your finances objectively, without emotion or bias.
The ‘Real’ Financial Adviser Solution
Being busy with our careers and our families usually means we don’t leave much time to organise our finances, so the temptation might be to turn to someone you know at work or someone in the family. These may seem like quick fixes, but to obtain real financial independence requires much more expertise than they may at first glance be able to offer. If you want to secure your financial future, you need a highly trained and unbiased professional with an approach that doesn’t only include financial aspects such as estate planning, tax planning and investments etc., but also looks at your life goals. These people are known as independent financial planners. The difference with independent financial planners is that they do not look at short-term gain, but instead will put together a custom plan for the long term. They will also help tackle any financial issues that arise on your journey to become financially independent in the future.
The ‘real’ financial planner relationship
Like any relationship, the one with your financial planner cannot be one-sided and will require input from both. A good planner will take the time to really get to know your values, interests and aspirations. This may seem a little intrusive, but if you are to allow someone to help you determine you and your family’s future then they need to build up an accurate picture of you. Although they will be helping you to determine the needs and goals for you and your family’s long-term wealth, the ultimate big decisions will still be yours. They are there to help you make the right ones without having to second-guess yourself.
You would think that finding the right financial planner would be easy; after all, aren’t they all offering pretty much the same advice? However, given that they need to get to know your values it’s crucial you find someone who matches them. Equally as important is finding someone who looks at things with a long- term perspective.
For example, going to someone who is up on how the stock markets did today is probably not the right person for you.
Working with your financial planner
When you have made your decision, the process of getting to know you can start and a good financial planner will have a tried-and-tested process which they take you through. This usually includes a series of meetings to get to know you, establish your long-term goals and put a plan in place to achieve what’s most important to you. The process might look a bit like this;
Getting-to-know-you meeting — gathering facts, discovering your current situation, defining your investment goals
Your Financial Roadmap meeting — presenting your personalised financial plan
Agreement meeting — agreeing the investment plan, formalising a working agreement
Follow-up meeting — reviewing paperwork and progress
Regular progress meetings — initial 3-month review of progress of wealth management plan and then every 6–12 months thereafter
1. Getting-to-know-you meeting
During the initial meeting the wealth advisor will take time to gather as much information from you as possible. As stated, as well as finding out all the facts about your finances, a good financial planner will also put together a picture of where you are now financially and help you establish where you want to be in the future. By getting to know you and developing a relationship they are better placed to help you achieve your goals. Here are some of the things they will cover:
About you
· Values and goals
· Family and relationships
· Current assets and investments
· What time-sensitive plans do you have/want
· Rate of return goals
· Any relevant contacts, e.g. solicitor, accountant etc.
About your financial planner
· How your financial planner works
· The stages involved
· Understanding risk
2. Investment Plan Meeting
Prior to presenting the investment plan your financial planner will need to gather all the information together, conduct the necessary research on your behalf and prepare an analysis of your finances. This is then used to put together a plan with realistic recommendations that will meet your long-term objectives. During the meeting, the plan will then be presented and together you can discuss each area of recommendation. You will then be given time to review the proposed plan, so you can make sure this is right for you.
3. Mutual Commitment Meeting
Once you have had a chance to look over the plan and make a decision on whether or not you want to continue, then a further meeting will be held to confirm you are happy to move forward. The main purpose is effectively to formalise the relationship so that your financial planner and their team can make the first steps towards implementing the investment plan.
4. Follow-up Meeting
Shortly after implementation, your financial planner will arrange a further meeting to go over all the paperwork and should also organise this into a physical folder or digitally based document vault for you. Here, you will also be able to ask any questions that may have arisen from the last meeting.
5. Regular Progress Meetings
Around 3 months into the process, it’s then time to meet up again and review progress. This initial meeting will focus on making sure all the paperwork is in order as well as discussing progress towards the investment plan. From here on in, the progress meetings will then move to either twice a year or once a year.
Let Your Financial Planner be Your Pilot
Although it can seem slightly disconcerting to leave your financial planner alone to get on with the job in hand, it’s important you allow them to do their job. This can sometimes be hard as it’s all too easy to be worried about what’s happening in the stock market and not be tempted to respond. However, a long-term investment programme is all about having a defined and disciplined plan so it’s important not to react with emotion and instead allow your financial planner to guide you through. In this sense they can act more like a financial coach to prevent you from second-guessing your investment plan and keep you focused on your long-term objectives. By letting them be your pilot, instead of trying to steer this yourself, you’ll spend less time and energy worrying about your plan and more time to relax with those closest to you.
About Kevin Wood
Kevin Wood is a director and financial planner at Oak Four Limited, a values based financial planning company in the UK. He entered financial services at a relatively young age and has spent considerable time over the years researching tools and strategies that work for his clients. Importantly, along the way he’s also discovered what doesn’t work.
Many of his clients share a common thread in that, although they were fairly well versed in their own finances, they couldn’t seem to achieve what they wanted under their own steam. Put simply, they found that when they tried looking into things for themselves it took longer than anticipated or required a deeper analysis than they were equipped for. Most people will also miss opportunities to make or save money due to the complexity surrounding the financial services arena.
Kevin gets to know his clients and their situation thoroughly, so he can help them put together the right plan for them. He also identifies the specific knowledge required to achieve their goals and provides the necessary resources to facilitate their decisions. He has a Diploma in Financial Planning and is continually striving towards further academic achievements that will enhance his expertise. When not helping clients, he enjoys spending time with his wife and three boys, reading about psychology and keeping fit.
Image credit to Carl Richards @behaviorgap
