Here’s a typical scenario that we’ve been seeing of late. An investor goes to a wealth manager for advice on how to invest their surplus cash, as bank deposits are no longer attractive. They might be seeking advice as a result of maxing out on pensions, selling a business or indeed just building up substantial levels of surplus cash from their earnings.
The prospective client receives a recommendation to invest in a particular financial product based on their risk appetite. This is positioned as a “personalised” approach. Most company executives and business owners these days are time-poor and often only invest intermittently, sometimes leading them to make impulsive investment decisions when they have money to invest. Is a financial product the best solution to meet their long-term financial needs and objectives? Do they need to invest all of their cash immediately?
Most likely not.
Financial products certainly have a place within financial planning, they often play an important role as the vehicles used to implement a financial plan. However, they really just occupy one segment of a much broader, holistic approach.
Comprehensive financial planning today is about every aspect of your financial life. To fully inform the process though, it doesn’t start with your money. It starts with you. This is because your financial life in itself is really just a means for you to live your actual life. So the process has to start with understanding what you want with your life in general.
It is for this reason that we spend quite a bit of time at the outset of our AdvisorPro process in helping you deeply consider and define your goals and ambitions in life. Once we know these, we know where you are heading, and its then time to develop a financial plan to get you there.
In a previous article, we set out the process we go through with our financial planning clients. There are a number of themes that underpin a comprehensive financial plan.
The roadmap
This is probably a very tangible element of the whole approach. It is the written plan that links your objectives, your current circumstances, your needs and then continues through to our recommendations to guide you towards achieving your goals. Products will potentially come into the picture towards the end of this piece of work, if they are needed to get you to where you want to go.
Building your investment strategy
Probably the most important word here is “your”, as a generic off-the-shelf investment strategy is very unlikely to achieve your objectives. Your investment strategy must be highly customised to reflect a number of important elements that are specific to you; your investment beliefs and principles, competing goals, your current circumstances, your existing pension and investment assets, your timeframes, your capacity to take risk and your own appetite to take risk. Each of these factors must be considered really carefully and must fully reflect your personal situation. Each of them is important, particularly in the challenging and volatile investment climate today.
We seek to build a dynamic investment strategy for you that will stand the test of time and different conditions. It is flexible, so it can easily be modified to stay aligned with your goals, your evolving circumstances and the changing investment environment. As we say to our clients, investing must be carried out with purpose and with patience.
General financial guidance
We are also keenly aware that there is a lot of activity in relation to your financial life that can ultimately influence whether your objectives are achieved or not, and these may not feature in your financial roadmap. How you manage your money, react to the financial media, your desire to take significant risks (or bets!) and avoiding behavioural mistakes.
We also guide you where we think you need to speak to other professionals, in areas that will support our financial planning work with you. We may guide you towards your solicitor to discuss your will or Enduring Power of Attorney, we may suggest that you avail of the services of a tax consultant if this is potentially beneficial for you. We see ourselves as the hub of your financial wheel, making sure that all the spokes are strong and fit for purpose to keep the wheel turning.
As investment advisors with a core expertise in helping people manage their investments, we are very aware that choosing the right products and getting them at the right prices are important steps on the path towards achieving your financial objectives, but it is important to remember to spend some time assessing where you are trying to get to, where you are now, and the tools you already have in your bag, before diving in and buying new products. Products are part of the how, not the where (your objectives), or why (your underlying hopes, dreams & fears).
