Planning Beneath The Surface

2007: 30,000 Leagues - Bologna

I am delighted that the blog has now reached over 30,000 hits this week. In a world where social media is a full-time job, it is satisfying that even a small company can achieve some fairly large results. Thank you for making the time to have a look at my blog. As you will have gathered I use is as a way of keeping clients up to date with things that I think are of relevance, as well as using it as a reminder, prompt or source to those that are not yet clients, but recognise that financial planning has got to have rather more to it than simply picking funds and products.

As readers and clients will appreciate, financial planning is all about identifying the lifestyle that you really want and then putting into action a series of steps to ensure that you get there. For some these steps and actions are easier than they are for others. In particular, for those that are able to control their income either be being a business owner, entrepreneur, artist or freelancer, it is considerably easier than for those living as employees, who are on set salaries. By way of a reminder, to my mind, there are only really three possible types of client, those that don’t have enough, those that do and those that do but don’t know. The main purpose of financial planning is to reveal what is required and then determine what, if any actions need to be taken. I hope that this blog is a pointer to some of the processes that we take our clients though and also a reminder that it isn’t always about big numbers, sometimes the numbers can be surprisingly small and very achievable.

If you have any suggestions about how to improve the content, or indeed topics that you would value being covered, please send me an email with your request. The way this works best is with your interaction, which means, retweeting, "liking" and adding comments.

Service To Exceed Expections

2011: Drive - Nicolas Winding Refn

Over the years I have been working hard to consistently improve our service to clients. Indeed sometimes, looking back, it is amazing to consider just how far we have travelled, how much we have done to improve things. I’m not one for resting on my laurels either; change is very much a constant, provided that it is done with the express intention of improving what we do for our clients.

I was in the position recently of buying a new car. I’ll be candid, this is an awkward topic for me. A car is simply a mode of transport, yet it is impossible to escape the fact that it says something, but precisely what, depends on how each of us view life. The question over “what car should your adviser drive?” is not one I take lightly. We all have an opinion, but I would guess that something that costs well into six figures would probably leave most people asking who was serving who. This is balanced against a sense that the vehicle needs to be of a high standard, else what is this communicating. You see my dilemma? Anyway, I have to accept other peoples opinions are valid, but unlikely to be of one voice.

The thing I really wanted to convey was that a car is really about the driving experience. There is an undeniable way that a car makes you feel. This is a sentiment that car manufacturers and their advertisers know all too well. However, how closely the advertisement sentiment is translated and matched into a real life experience is where the proverbial rubber hits the road. I am delighted to say that to date, my experience of the BMW car dealership in Cobham was good. I was surprised that their customer relationship technology was somewhat dated and not as fast as my normal working day experience, but this did not detract from the fact that staff were friendly, polite and patient. I wasn’t hurried into a decision, I got what was promised. However I also got a bit more than that. Many of the “tools” or extras from the brochure are actually far better than I had thought. The factual information was no match for the hands on experience. This is something that I aim for with clients. That sense of “wow” when they have their financial plan presented to them – the sense that we have captured what they want from life and can show them what, if anything needs to be done to achieve the lifestyle they want. It is the realisation that you’ve been heard, understood and your expectations have been exceeded. Now that is what I am aiming to achieve with my clients.

Tips For The Rich And Famous - Don't Duck The Big Question

1967: The Comedians - Glenville

You have probably read in the press about a variety of high net worth and well known individuals that have been “somewhat let down” by investment schemes that have rather backfired. The investments have tended to be in the arena of “alternative investments” into film and music businesses. As ever, not everything that you have read in the media is either fair or accurate. Indeed I am still unclear as to why anyone’s personal tax affairs become public knowledge as this surely breaches confidentiality rules and data protection laws, something that I take very seriously indeed.

Anyway, the premise of such schemes is meant to be to genuinely kick start businesses, notably the film and music businesses, but frankly could be any type of business. The great disappointment is that these ideas are often created for the tax benefits rather than helping a business to grow and prosper. Indeed I often come across schemes that are designed to make a deliberate loss or have no real prospect of making any money. As a result tax advisers (many well-known ones) promote these enterprises, which come with some fairly hefty fees.

In many cases, the theory of the investment is untested. There is reliance on QC opinion and previous interpretation of tax laws. However HMRC is determined to close down loop holes and to be blunt, that is always their objective. There is a degree of “playing with fire” about many of these schemes, of course determining which is which is not always straight-forward and even the regulator would point out that these sort of schemes are for a rare type of investor, a sophisticated and professional one (not simply one that wants to save tax).

Setting aside the above, what concerns me is the advice that many of these high net worth and high profile individuals receive. It would appear that their advisers fail to either explain what the investment really is about. However, more importantly, I wonder how many have actually had any “proper” advice, providing a values based financial plan, that is not about how big the returns might be or how little tax can be paid, but about how well the financial plan serves that persons life. I have a suspicion that many of those football managers, comedians and pop stars have not been asked the right questions or indeed the big question – how much is enough? (without judgement). I suggest that to avoid a comedy of errors, give me a call if you want to find out the truth about money and how it should serve you (not the other way around).

Same Old Story? No Chance!

1961: West Side Story - Robbins

Perhaps I look for the proof that demonstrates to me that people want a proper relationship with their financial planner. I’m sure that I’ve heard it said that we look for evidence to prove our own theories and discount things that don’t. At the weekend, whilst many were enjoying the misery of yet another English football team performance, I was with a much smaller number of people packed into a single room. In an age when many of us have homes full of high-tech equipment, the ability to watch almost anything, anywhere on a screen any size, it prompts the question why so many turned up to an old building, with seats that need updating, to watch a film made over 50 years ago, accompanied by an orchestra of fairly ancient instruments about a story that was originally written over 400 years ago. However, the sum of the parts is not the entire story, for this was an event at the Royal Albert Hall, one of the most splendid buildings in London. The performance was a screening of Leonard Bernstein’s West Side Story accompanied in full by the Royal Philharmonic Orchestra. The event was an experience of high calibre, timeless excellence. We gave up our creature comforts at home for the collective experience, a unique opportunity.

Most people have heard of West Side Story, developed since the 1940’s from Shakespeare’s Romeo and Juliet, becoming a musical in the 1950’s before being made into a hugely successful movie. Whilst the film looks dated on many levels, the sentiment of class and racial prejudice is still sadly very much present. I could not help but feel angry at the folly of failing to embrace difference, to live in harmony. It seemed that the gangs valued the wrong things. In a culture of celebrity, it has been said that we know the price of everything, but the value of nothing. Financial services is not much different, however great financial planning involves engaging your personal values with your long-term (life long) goals. This is achieved by a proper relationship with your adviser, not as someone that is there to sort out your investments or insurance, but as someone that you can trust with your most precious treasures – your dreams, your story.

Medical NHS Clients - Award Time

Whilst GP's may be in the news for strikes over the NHS Pension changes, don't forget that the NHS Leadership Recognition Awards are back. The 2012 nominations for the nine categories close on 29th June (just a week away). So get those nominations in and let me know if you get nominated. The nine categories are for Board, Community Leader, Innovator, Inspiration, Leader, Mentor, Newcomer, Partnership and finally Quality Champion. More information can be found at the dedicated website.

Cream at the Top?

1965: Life at the Top - Kotcheff

Many Financial Advisers got somewhat hot under the collar this week, many unleashing venomous attacks on two rather large targets. The first being the now departed head of the FSA, Hector Sants. The second was the MAS (Money Advice Service) paid for from fees levied to financial advisers, yet who seem to promote the notion that advice is free and that their definition of “independent” financial advice is out of line with the rules, although the Advertising Standards Authority do not think that this is a problem. You may have seen the television adverts. The website is meant to be an educational information service about financial services in general and I often refer people to it to have a look at some of the information which can be quite good.

However, in these days when the performance of CEOs is being examined, many are somewhat angry about the level of remuneration for perceived failure. Advisers have been outraged by the published salaries (p18) for these organisations, who often appear to suggest that advisers are the ones ripping off the public, yet seem to pay themselves very considerable salaries for roles which might be described as attempting to protect and educate the public. Martin Lewis waded into the Treasury Select Sub Committee’s inquiry into the MAS, saying that it was not very good (his words were rather blunter). Indeed even Lord Turner seems to believe that MAS is not terribly effective, yet it’s CEO Tony Hobman is paid over £350,000 a year (£250,000 salary with the balance as other benefits). Mr Sants earned £835,731 as the highest paid Director of the FSA (Lord Turner was paid £500,474 for his role at the FSA in 2012). Given that all these people work for the country in State Institutions it is interesting to note that our Prime Minister currently earns £142,500. I have no idea if these salaries are value for money, I'm not in a position to assess individual performance. However clearly some very valid questions are being asked and sadly, a few own goals appear to be being scored all around.

 

Engagement With Your Accounts?



2012: The Five Year Engagement - Stoller



Business owners should to take heed from a story in Lancashire, where an employee stole over £200,000, much of which was used to fund an expensive wedding and lavish lifestyle. The BBC report that a part-time accounts assistant forged over 120 invoices over 2 years, marking them paid and then sending funds to her own accounts. The small business concerned, employing over 20 staff and estimates that this has cost them over £300,000. The defendant has been sentenced to 18 months in prison.

It seems that these days having a low self esteem is regarded as a form of defence, which appears to have formed an element of the court hearing. The defendant’s solicitor suggested that due to a low self-esteem the defendant “felt that money and all the trappings that money could buy would make her a more attractive proposition”.

The lesson for business owners is to make sure that you check the accuracy of book-keeping. This involves having thorough, sensible systems and controls in place, something that financial planners know a lot about (managing business risk as well as investment risk). The sums involved are reasonably significant and were gradually stolen over 2 years. It is worth remembering that the behaviour of anyone can alter dramatically under the wrong pressures. As we are in somewhat difficult economic times, it is perhaps more important than ever to make sure that you have proper controls in place to protect your livelihood.

 

Make Time Count - There's A Drag To Being Older

2010: Beginners - Mike Mills

Some people view financial planners as a bit of a killjoy, to be avoided, why? Because we have a habit of reminding people of their mortality, something that we all know, but live as though it’s an issue that can be thought about at some point in the future.

Good financial planning involves facing some home truths and more recently I have asked clients the very blunt question, “when do you plan to die?” of course none of us know when this might be. The purpose of the question is to start to help form a broad guide for when this might be. Actuaries seem to be suggesting that of babies born in 2012 in Britain, around a third of them will live beyond 100. Of course I’m not expecting to be around to find out if they were right.

So what do we use as a guide? Well your family background for starters, perhaps you might frame your financial plan with the assumption that you outlive your parents by a few years, not always possible, but one approach. Another is to take the latest ONS national statistics, which are historical, but to 2010. If you are male and now 65 the average life expectancy is another 18 years (83) or 20.62 (85.62) if you are female. So you may wish to assume +/- 5 years for this. An interesting element of this is called “mortality drag” so skip forward to age 75 and men have another 11 years to live (86) on average, or 12.82 (87.82) for women. You can see that they appear to live longer than the projection for those aged 65. There really is statistical evidence to assert that the older you are, the longer you will live. Strange, I know, but true. The point is that we need to start somewhere with our assumption for a plan so that we can ensure your money doesn’t run out first. Another important point is to remind yourself that time is running out, so make it count whilst you can.

Are You Doing What You Want To Do Today?

Financial planning has very little to do with financial products. I have said it before and I will say it again. Financial planning is about figuring out what you want from life - what you truly want, not what you think you should have, do or be, but in-line with who you believe you are. This is deeply connected to your passions and if you will forgive something that sounds rather twee, but I have not yet found another way of putting it - the reason you are here. Whether that's to be the best Anaesthestist, Widget maker, Designer, Business Manager, Florist or Actor - the important thing is to be consistent to your values and who you think you are.

So when inevitably I discuss "retirement" I do so with a degree of apprehension, because most people have the idea that at 65, they can finally stop working and collect a monthly income from a pension plan of some form. Good financial planning will achieve this for you, but great financial planning will take a different approach.

Great financial planning will ask what do you really want to do? if you love it so much why would you stop? what would make you stop? how about thinking in terms of a financial freedom day rather than a retirement day - financial freedom being the point at which you can choose if you want to "work" or not, and if you want to - do so on your terms. It is with this in mind that I came across a new little film "I'm Fine Thanks" being promoted in the US. Have a look at the short trailer below. It plays into what I'm talking about. I don't know quite what the film will suggest or any of the conclusions drawn, but at least some better questions are being asked, which is what I like about it. Remember, that great financial planning is about YOU not your adviser. I'm not in the business of judging people's lifestyle or motivations, I am in the business of helping them focus and get there.

The Value of the Third Eye

1942: Thru Different Eyes - Loring

Times are harder. It is often difficult to face up to harsh facts. I have been working with a lovely couple for several years and we recently reached the point, where some difficult things needed to be said. They had been having a very tough time. Business was not going anything like as well as hoped, for a variety of reasons, many of which were beyond their control. Sadly the situation needed some significant surgery and resulted in having to sell and downsize the family home. This was very difficult as you might imagine (and many that run their own businesses can imagine such a scenario).

Unfortunately the advice from their Accountant and Solicitor was good but wrong and they were due to follow through on it. Fortunately our meeting revealed further information and deeply held values that the other professional advisers had missed. It wasn't their fault, they were not "lacking", merely that a good financial planner has a very different relationship. It is perhaps surprising to many that the Accountant was focused on the money, as was the Solicitor - but missed the bigger picture. Their advice was "fine" but wrong in the context of what was really wanted and needed, because this is rarely within the remit of either, yet many might presume that it was, because, to simplify matters, it was about protecting the home from a future that may not go as well as hoped. I'm not for a moment knocking Accountants or Solicitors, merely attempting to explain that as a financial planner (a good one) my role is to help clients to verbalise what they really want from life and then provide solutions. This involves looking beyond the presenting problem and invariably goes far deeper and then shapes the advice from the client's real perspective.

I work with other professionals like Accountants and Solicitors. My role is to help each perform their own to the best of their ability and it is helpful that like most financial planners, I can re-interpret what other professionals say to a client in a way that makes sense, which is quite an unusual position to be in when my own profession is known for talking in jargon all too often.

Its not about the Money

1958: The Happy Feeling - Edwards

It has been another full on week, with some significant work being done for clients. It is a fantastic feeling to be able to reveal to clients that they have enough to do the things that they want. I had a case last week where a couple were very concerned about their future and thinking that they would be have to work until in their late 60's perhaps older. Imagine the feeling that they had when I demonstrated with proper financial planning that not only did they have enough to retire at 65 but could actually afford to lose an income and still do so. This was quite a shock... were my numbers right? well we had certainly checked their information several times, yes there was the reality that assumptions about the future are just that - assumptions, but the data was indeed correct. I had even built in some doomsday scenarios showing the impact of stock market crashes - which still revealed favourable long-term results.... with a big caveat.

The caveat being that they do not increase their lifestyle spending significantly. This is why asking clients to complete details about spending patterns is really vital. Having realistic expectations of what you intend to do during "retirement" or as I prefer to call it your "work not required" period, is rather vital to get broadly right. Hence the more I understand a clients real plans/desires/aspirations, the better and more accurate the financial plan. This is why I spend a considerable amount of time updating income and expenditure information, as clients will know, who have been asked for their P60's etc over the last few weeks. Whilst it may appear that I'm asking about the money, I'm really asking about your lifestyle, which is the one thing that few are prepared to give up or reduce upon retirement.

  

How To Select Your Future Wisely

2011: Future Lasts Forever - Alper

Great financial planning tends to involve providing a variety of options to achieve goals. A meeting with a couple recently generated a good example of what I mean by this. The clients want to retire early, before  final salary pension schemes would normally begin payment. Having discussed an outline of their required lifestyle previously, at this review, we had more detailed information to work on. They now had quite a clear idea about where they would live and the sort of lifestyle that they required.

Initially I was able to identify that there was a shortfall in their required income target between early retirement and the normal retirement ages of their final salary pension schemes. There were a number of ways that their goals could be achieved. By way of broad example, we considered simply building a fund to "plug the gap" which involves investment risk, although this is very manageable. We also considered part-time work at a much reduced income, moving home to release equity, as well as taking the final salary pensions early incurring a hefty early retirement penalty along with a few other options, including assessing clearing the mortgage earlier. There were lots of options and consequences with each, yet we did not really mention any financial products at this point. A great financial plan will provide you with possible scenarios about the future, not in the sense of depression or optimism, but in the very real, grounded values that a client has and the results that they wish to achieve. A financial planner, well a good one, will help assess what is realistic, help prioritise and  design a plan that enables the goals to be achieved. The precise way that this is done using financial products and an investment strategy are very much subservient to this, yet many financial advisers talk about the money and products first, which is the wrong way around and in my opinion leads to poorer results, which may be the difference between having the lifestyle you want, or the one that your adviser picked for you.

Whilst Fund Managers, Stockbrokers, Traders, Dealers, the investment media and a few others may talk about trading in options and futures, the only future that you really should be concerned about is your own and this will have a variety of options to help you build it. A great financial adviser always puts your plans and values together to form a workable financial plan.

Seriously Average Statistics?

1987: Less Than Zero - Kanievska

Interest rates remain depressed and look set to do so for some time to come. The Bank of England today announced that they were holding rates at the current level of 0.50%. Inflation (currently 3.0%) seems to be returning to within the range that the Bank have set as the target and we are all aware that the economy looks somewhat fragile with the combined output of all business being pretty much stagnant. A fairly unhelpful word given that in practice, businesses are far from stagnant. Most are working very hard to win orders, customers and contracts, requiring new business to replace any that is being lost. So to term this "stagnant" would seem exceedingly unfair. However as a combined average figure, the economy is currently growing at something around 0%. The first quarter of the year had a negative rate of growth -0.3%, which was from a revised  figure of -0.2%, depending upon your political leaning, you might term this as a reduction by 0.1% or alternatively a 33% decline. Hence care needs to be taken when reading any such figures, whatever their source. After all, this is still only an estimate. It would appear that most of the negative growth (?) came from the manufacturing sector (-0.4%) whereas the service sector grew at +0.1%. As with all statistics, whilst accurate, how they are interpreted is open to debate. To focus on the average net result, can miss vital detail - such as the often used example, head in the oven, feet in the fridge - on average "just right". By the way, as humans we aren't very good at processing "average"... ask any room of people about their driving skills. Most will assert that they possess above average driving skill, which of course, cannot be possible. By the way, very few indeed would admit to having below average skill.

Stop Wishing, Start Doing or Delegate

1996: Wishful Thinking - Park

Financial Planning is not about wishing, it is about planning and doing. The long Jubilee weekend was not something that we wished into being, but something that had been planned. We may have wished for the weather to have been rather better in June, but that is beyond what we can control. Indeed some of the performers at the main concert may now be wishing that they hadn't agreed to perform as it revealed some rather obvious and disappointing shortcomings. Some of them should have kept to "their own" material or normal way of doing things. Wishing for a talent is not the same as possessing it (I'm being very generous compared to many of the views expressed on Twitter and in homes across the country, though it would seem that most of the newspapers reviewers must have been too worried about Leveson or enjoying their street party somewhere or else at the Coldplay concert).  The occasion itself seems to have largely escaped normal newspaper critique, which is surprising to say the least. Perhaps the media are now too afraid to upset the celebrities. Sadly, leaving people with a sense that they can do things that they really shouldn't is not helpful in the long-term. A good financial planner will not flatter the ego, but will calmly help clients to be realistic and provide a truthful assessment. Financial planning has nothing to do with some sort of hocus pocus wish list (such as being able to sing). Certainly in discussion with clients I help them to prioritise what is important to them, some of the list may be rather wishful and this needs challenging. For example, having a pension of £75,000 a year is a wish that won't come true (barring the miraculous or windfall) if you only save £5,000 a year. Wishing to retire at 55 is rather different from planning to do so.

The skilled financial planner is essentially acting as one that helps prioritise and then take action. There may be a degree of challenge as well, we all want high returns for low or no risk, but sadly that is not realistic. However, great financial planning is more than that, it goes deeper. Great financial planning works in partnership, exploring together what actually is important to you, uncovering and applying your own values and confronting unrealistic expectations. Great financial planning provides peace of mind, focus and freedom.

This prompts a vital question, can you delegate? Do you want to spend your valuable time becoming skilled in aspects of life that you know are important, but not your own skill set and may hold little real interest? Do you act as mechanic to your own car? There are obviously some tasks that you might select to do - perhaps mowing the lawn, but I would suggest that this occurs where some pleasure is derived (being the mechanic to your weekend vintage sports car is rather different from servicing the X5). In short, stick to what you are good at and delegate to the things you cannot do to those that can.  So too with financial planning, (and singing live) sure, have some fund money to play the stock market, but don't bet the house/pension/school fees/lifestyle. Wishing things were different has no part in financial planning. Clearly identifying your lifestyle and working towards the best way of achieving it is about taking action.

Moneysaving Expert Banks £87m

1947: The Web - Michael Gordon

Well, you have to hand it to Martin Lewis. Today he has agreed sale of his consumer website Moneysavingexpert.com to the portal moneysupermarket.com  simples! (oh no that's the other lot!). Anyway, the content, much of which is provided by users in forums has a focus on saving money, covering everything from a 2 for 1 deal at a fast food outlet to complaining about poor service and mis-selling. The company (his own) has been sold for an agreed £87m....now you are wondering where the value is in this free to use site and why anyone would pay £87m for it...is this another one of those overpriced dot.coms? Well, who knows... the thing is that the site has become a portal for a way in to consumer purchases, be it car insurance or burgers. It is essentially an advertising hub, which in the days of online advertising which leaves traditional print advertising in its wake, is very much a part of future sales.

So how does this leave the consumer? perhaps with a sense that the site is little more than a gateway to discounts, money back and hopefully some useful tips to avoid being ripped off. I have considerable time for Martin Lewis, he has done a pretty good job in attempting to educate the public about budgeting in a way that the Money Advice Service, FSA and many financial advisers have clearly failed. He has also made tremendous efforts successfully campaigning about PPI mis-selling. I'm very much on his side (and not paid to say so). I have to admit to finding the site all too busy, but that.s because it is aiming to do so much, it is massive. However is it really independent? links to companies are not put there for free. This may sit rather uncomfortably with many of the users who seem to believe that they are being taken for a ride and generating too much profit for others. Perhaps they don't know how business operates and that somehow it is wrong to make profit. So Martin may not want to publish his £87m coup too loudly.

So who are Moneysupermarket.com? a FTSE250 listed company, predominantly owned by Simon Nixon. The company grew out of a mortgage comparison database for mortgage brokers (Mortgage 2000) but began adding more credit searching functionality. Currently, the business is not offering "whole of market" but offers a comparison from limited range of providers. There are deals cut with providers, so each sale involves something going towards moneysupermarket and why not? the site and service are free to use. However, be aware that your details might also become a marketing "lead" which is traded to firms interested in selling to you. There's nothing wrong in this per se, but I do wonder if people realise what they end up with. However, this is the future for most UK consumers, who will not be able to pay for financial planning advice. The million dollar question about whether it will be good enough remains to be seen, but in the meantime, at least one British entrepreneur has cashed his chips and not a meerkat in site... er sight.

Tax Task Force Target Landlords

1949: Task Force - Delmer Daves

Its a weekend of celebration for Her Majesty and many will be holding street parties and decorating their homes with bunting and the Union Jack. So perhaps a little surprising that Her Majesty's Revenue and Customs (HMRC) has chosen now to announce a new crackdown on tax evasion from rental properties. HMRC "task force" teams (rather a dramatic term, don't expect them to swoop down from helicopters on a rope!) will be inspecting the books to ensure that tax is being properly paid - all part of the focus to ensure that everyone is paying their dues in these austere times. The focus will be on London, Yorkshire, East Anglia and the North East. They anticipate finding £17m of unpaid taxes. So whilst you take a bite on your community burger, be mindful of the fact that the landlords amongst you need to have your tax affairs in order (which of course is true of anyone anyway).

Mike Eland, the Director General of Enforcement and Compliance for HMRC said "These six new taskforces will bring together specialists from across HMRC to tackle tax dodgers. If you have paid all your taxes you have nothing to worry about. But deliberately evading tax you should be paying can land you with not only a heavy fine but possibly a criminal prosecution as well. “This is not an empty threat - HMRC can and will track you down if you choose to break the rules".

Remember tax avoidance, (using the tax rules and allowances to your advantage - such as ISAs, pensions, capital gains tax allowances) is perfectly legal but tax evasion is most definitely illegal. I would also remind you that it is now a requirement for Financial Advisers and Accountants to whistleblow on suspected tax evaders (failure to do so can result in a custodial sentence). Thankfully, this has never been an issue with any of our clients.