Personal Financial Planning is vital

Saturday, 16th May 2009 15:39 - by Resident IFA

I had appointments with two potential Clients yesterday, being at different stages in their lives and financial planning priorities. Potential Client 1 – Building a sound financial base A couple in their thirties with three young children. The husband is a Company Director who is just seeing the beginnings of being able to enjoy the benefits of the good work he has put into an existing company after he came on-board. Interesting financial planning issues: o Glaring issue: Paying over £30 into a Payment Protection Insurance that covers only redundancy. He can’t make himself redundant as, being a Company Director, is effectively self-employed. Hmmm… o Mortgage: Fixed rate soon to end and has a keen interest in cutting the term and overpaying where possible. A big tick in the box. o Life insurance: A good foundation built by having joint life & critical illness insurance on the mortgage, but what happens to the family’s standard of living were one of the Parents to die before the children are financially independent? o Pension: At present, only his company pays a basic and somewhat random £100 per month. Seems a good provider, but what income do the Clients want in retirement? When do they want to retire? Will the existing contribution see them achieve either or both of the age/income goals? Are the current investment funds in direct relation to his personal attitude to investment risk? And the list goes on… I have offered to take the Pension plan over in an advice capacity, the firm seemingly not having a relationship with an IFA (Independent Financial Adviser) at present. Potential Client 2 – Preparing for retirement A couple in their fifties hoping for restful retirement years. They have a decent springboard of frozen/current company and personal Pensions, a relatively small Mortgage debt, and a clear vision for what they ‘hope’ to do in retirement. I want to see if I can help them develop their ‘hope’ into something a little more concrete. Interesting financial planning issues: o Mortgage: Has recently reverted to the lender’s variable rate of interest. Have maintained their payments to repay the mortgage more quickly…must have been the day for this type of tick in the box! o Pensions: Total joint estimated income of £21,000 per annum with associated tax-free lump-sums in the region of £15,500. Not a bad start, and could bank more capital if they down-size, as is the plan. I was asked “What can I do to improve the situation?” Pretty simple: Increase your monthly Pension contribution and ensure that the investment funds within the Pension are tailored to your risk profile and are effectively managed. Again, sounds somewhat familiar… Does this sound reminiscent of your situation? Have you recently reviewed your financial circumstances to check that you are not needlessly paying for policies and are on-track to achieve your long-term financial goals? Not many people do. A comforting final thought to help you devote time to your personal financial planning and seek out your local, or better still, personally-recommend IFA…I did not charge them a penny for my time yesterday and will provide initial feedback and guidance information for the same business-breaking fee (I hope not!). Until next time…