There are many areas in which financial advisers add value to their clients.
We have broken them down into three ‘branches’, with several individual elements in each branch. In this blog we look at the Goals branch.
The Goals branch looks at areas such as pension freedoms, cashflow modelling and intergenerational planning. We have outlined a little more detail about some elements below:
- Pensions freedoms – the freedom to draw pension benefits rather than buy an annuity was introduced in 2015, initially they were trumpeted as offering great choice for consumers. But over time it has become clear that planning and managing income from a pension pot, that may have to last 35 years or more is far more complex than initially thought. Understanding sequence risk and asset class returns vs inflation; establishing a sustainable withdrawal rate; managing life / health longevity; and planning cashflow over four decades is well beyond most investors – especially as they move into later life. A financial adviser can add real value both creating an initial plan and coaching clients through the options over time.
- Intergenerational and charity planning – student debt and rising house prices have put huge pressures on the next generation. It is little surprise that parents and grandparents want to help. But what are the most effective and secure routes. How do clients gift assets but retain family control? What are the tax implications of gifts or house purchase? Advisers can help with all these questions to provide confidence and the value clients seek.
- Estate planning, wills and Power of Attorney – managing the transition of wealth from one generation to the next is a complex area. Advisers have many years’ experience in this area and work closely with other professionals. They can help simplify the issues, meet clients’ needs and provide the long-term certainty and flexibility they seek.
- Reducing debt – many people try to save while at the same time paying credit card or other expensive debt. Advisers can help build a short-term plan / budget that combines reducing debt, building rainy day savings, and looking to the future. For example, they can look at current life cover arrangements with a view to saving money, they can look at pension plans with a view to reducing costs. And advisers can look at clients’ current savings and ISAs to see if there are more efficient and cost-effective ways to organise clients’ savings.
- Avoiding common pitfalls – sticking to a plan can be hard when markets are up or down substantially – and humans are proven to be often poor at making good decisions. Advisers can help manage the best way through these times. Some estimates show that investors may be losing up to 2% per year¹ by falling into common traps – advisers can assist in avoiding these.
- Insurance and trust planning – using trusts, wills, and other strategies, advisers can make sure money ends up in the hands of the people that clients want, when they want. Poor planning can see up to 40% of hard-earned savings or life assurance policy proceeds paid to the tax man. An adviser can give clients confidence that their wishes are met, loved ones protected, and business assets secured.
- Financial goals – when Alice (in Alice in Wonderland) asks the Cheshire Cat, “Would you tell me, please which way I ought to go from here?” the Cat replies, “That depends a good deal on where you want to get to”. It is the same for all of us – the first stage in achieving long-term financial goals is to have clarity of what they are. This is a key area of adviser expertise, and they can help discuss, plan, and agree a detailed and realistic plan for clients’ financial futures.
- Cashflow modelling – people find it hard (or impossible) to project returns, costs, inflation, and their income needs into the future – advisers use powerful but simple tools that will illustrate this for clients. Seeing a picture of future “money in and out” can really put financial plan progress into perspective.
- Liaising with the clients’ accountants / solicitors – adviser experience of working with accountancy and solicitors’ practices gives a great knowledge of tax and legal matters – both personal and corporate. Having clear and joined up plans is more effective and gives clients great peace of mind.
There are two more branches where advisers add value, together they make up the Value of Advice Tree (below). Other blogs will look at these areas in more detail.
If you are an independent financial adviser and would like more details please email us: firstname.lastname@example.org
¹Betterment’s Quest for Behavior Gap Zero average of 7 studies is 2.21% pa loss. https://www.betterment.com/resources/betterments-quest-behavior-gap-zero/
Visit the Literature & Insights section of our Adviser Centre to download the ‘Value of Advice Poster‘ a downloadable pdf that can be used with clients as a sales aid or poster (to be issued / approved by the IFA firm).