Financial Planning to a Different Rhythm - Yours!

1992: Strictly Ballroom - Baz Luhrmann

To many people financial planning is about building up savings in a variety of financial products, coupled with trying to achieve market beating returns. This is a complete misunderstanding of what it really is. A meeting that I had this morning is an example of what financial planning is (or should be in my opinion). Financial planning is about you setting the tempo, the rhythm and pace to your own lifestory, not outside forces such as "the markets". You don't have to do things the way everyone else does, but if you want things to work, you need a plan and one that includes a few safety nets.

Over the last six years I have been working with a charming couple, who I always enjoy seeing, as they planned their retirement. This has now happened, though they are busier than ever before. We have put in the groundwork over the years and today was an opportunity to review progress. Over the years we have been discussing their plans about their future. Today, most of our focus was on how they plan to spend their money, provide for their children and also support charities close to their heart. We discussed how we might make sensible provision for care or assistance in their later years to ensure that their funds don't run out, but with a significant emphasis on living generously today.

After discussion I am able to make a few minor adjustments to their plan, to demonstrate what investment returns are really needed each year, which when factoring in their lifestyle spending and giving plans is a meagre 1.44% a year after all investment costs, which clearly has implications for how a portfolio is structured and has made allowance for inflation. Our thoughts turned to the current problems in the Eurozone and the impact that this might have on selecting a few worst case scenarios (such as the stockmarkets crashing), should their portfolio suffer a 35% decline and not recover, (by which I mean no "bounce back") investment returns would need to increase, but only to a very modest 3.15% a year. In short, we identified that they were highly unlikely to ever run out of money - the only real pressure was from their own spending behaviour (which we review, not to be controlling, but to ensure that our assumptions are broadly correct). 

I would suggest that (from over 20 years experience) anyone seeking financial planning advice is not terribly interested in ISAs, pensions or investments - but whether or not their money will run out, whether they will have enough and in the event of calamity, what the consequences might be. This delivers genuine peace of mind and appreciation of the long-term "game" as well as what is really important. This is the antedote to a media filled with stories of woe and fear..which reminds me of a quote from the Baz Luhrmann film Strictly Ballroom: "a life lived in fear is a life half lived". If this is what you would like from your financial planning, what are you waiting for? pick up the phone or send me an email.