Why do people first decide to see a professional about their finances? In our experience, it’s generally because they have a specific need they want to meet, such as setting up a pension or making the most of an inheritance or other windfall. “I need product X, so I’ll go and see expert Y to set it up”.
That’s all well and good, but what’s really interesting is what happens next. Once we start speaking to a client, it becomes clear that there are actually more significant concerns driving the need for advice. It’s often something they didn’t realise before they walked in the door – something much more personal, and often not financial at all.
Yes, needing a pension is a good prompt to seek advice, but the financial planning process is there to add much more value than just a transactional solution.
The real value of financial planning
– “I’d like a pension, please”.
– “Would you like financial peace of mind with that?”
We’ve talked before about the difference between financial advice and financial planning (read more about that here). In a nutshell, advice generally tends to be product-led and address one specific need, while financial planning looks at the wider context of the person’s life and wellbeing. It’s more than just a transaction.
As Financial Planners, it’s our job to look for clues and pointers to help identify your priorities and goals in life. It’s not just about the money. In fact, we won’t go near the financial side of things for a while, because the ‘why’ is more important than the ‘how’ in these initial stages. But we will explore some difficult areas in search of relevant insights, for example, about your family’s health history and life expectancy.
The light bulb moment is when we both get to understand the full context of your family’s situation and establish what really matters to you. Once we pinpoint your genuine needs and expectations, that’s when we can focus on how to achieve the right goals.
Unlocking the real issues
One of the real needs the financial planning process often reveals is a deeply serious one: What if I die sooner than expected? Will my partner and family be ok? Granted, it’s not something we like to think about, but ignore it at your (family’s) peril.
We’ve had couples come to us for a simple financial need and realise they have no solid plan in place if the unexpected happens. While death is inevitable, if one spouse has a health issue that means they may not live as long as the other, it’s vital to put arrangements in place now to make things easier in future. In this case, that simple initial need has turned into the pressing requirement to make sure your loved ones will be looked after, whatever happens.
Revealing this kind of health situation also calls for an exploration of your existing financial habits. If, for example, you know you have a shorter-than-average life expectancy, should you be focusing on saving or does it make sense to spend more now to make the most of the time left? This decision will also depend on the size of the legacy you want to leave behind. Again, a potential concern you may not know you had before you spoke to a Financial Planner.
A clash of ideas
The financial planning process is also designed to uncover other hidden but vital issues that shouldn’t be left ignored, such as different needs between partners. You may find, for example, that your preferences regarding spending vs. leaving a legacy don’t match your spouse’s expectations, or that you don’t agree on who’ll get what or when. You may even have wildly different ideas about the level of risk to take with your investments. It’s surprising how often we hear couples say, “I didn’t know we didn’t want the same thing”. It absolutely happens and it’s definitely manageable, but it’s best to address issues like these now, rather than when it’s too late.
Taking advice for the right reasons
What we’ve said about the financial planning process may make it sound as if it can be intense and challenging – and it can be. But it’s also an empowering and positive experience that clarifies your goals and puts you on the right track for where you want to be. It’s the path towards securing the peace of mind that comes from knowing that both you and your family should be more than ok.
It might not be what you expected when you knocked on the door asking about a pension. And the real value might not be where you thought it was. But it’s definitely where it should be.
If you’re ready to get the most value out of your life, give us a call on 01327 354321 to book an initial chat.