The Managing Director of Principle First discusses the importance and meaning of good financial planning.
It continues to amaze me that the majority of consumers do not sit down with their financial planner once a year, to review their financial planning and take additional financial planning advice. True financial advice is not a single exchange of information, it is the beginning of a relationship, and an ongoing process.
If your relationship with your financial adviser or financial planner is not based on regularly reviewing your finances, then you were ‘sold’ products, but not ‘advised’ in the context of a continuing assessment of your financial wellbeing.
At Principle First, we define financial planning as “the process of taking you through your financial lifecycle to the the point of financial independence”.
Financial planning is for everyone, both those who have the ability to achieve financial independance early in life, and those who reach financial independence only at the point of retirement.
Unfortunately, however, there is a third group. I refer here to those who may never reach financial independence at all. Perhaps this is because they were not earning enough. Unfortunately, for many others this is simply because they failed to seek advice, during their working career.
Your financial life cycle spans all stages of your adult life. Different products are uppermost in your mind, at different points on your journey. As you raise a young family, personal and family protection is required, should the worst occur, and personal insurance, in its various forms, is a necessary and under-appreciated area of financial planning.
As you are earning more money, and paying more tax, your financial planning may shift its focus to streamlining your tax affairs. With good financial advice, you can make use of many tax-efficient products that fully utilise your tax allowances, and can ensure that money you were formerly paying the taxman is redirected into HRMC-approved investment vehicles.
As you move further through your life cycle and the children leave the nest, you will hopefully have built up a reasonable pension fund. Now you have more disposable income, and are able to invest and save using the most efficient products. With good management this can allow you, through your pension, to build enough capital to have 60% of your employed income for the rest of your life. At this stage, you reap the rewards of careful financial planning, and have arrived at the point of financial independence.
Only 20% of people seek financial advice. As a private company, we see this as an exciting opportunity for growth, but as a good corporate citizen, we also acknowledge that this may have a dreadful impact on society. This problem will affect future generations. With life expectancy increasing, many are facing a future with an inadequate income, having accumulated very few assets, if they do not plan effectively now.
Our advice is to discuss your options with an independent financial adviser, work together to put a rounded financial plan in place today, and adapt and develop that plan by arranging a telephone or face to face meeting once a year. Identify where you stand now, financially, and where you wish to be in the future. Plot a line, and, on an annual basis, discuss how far above or below that line you are.
To do this, we at Principle First provide you with a unique financial planning document. Register for OnePlan (TM) to see an example of our financial planning report. Bear in mind that we also send you an updated document once a year, demonstrating the strengths and weaknesses of your current OnePlan. This is a very important ’building block’ in securing your financial future.
Principle First assures you of a superior standard of financial advice.
Give us a call, or complete an enquiry today.
by Gareth Flanagan, MD Principle First (the financial advisers).
