What questions are you most often asked?

Financial planning is a fairly simple concept. There, I’ve said it! It is at least in the eyes of clients, who consider it broadly as sorting out their money stuff. Of course, effective financial planning is anything but simple. It takes a lot of expertise, talent and a really good process to transform the financial lives of your clients.

I came across a report in FT Money who carried out a piece of research among 300 UK clients of financial advisers, with the aim of uncovering their most common questions and the solutions that advisers are offering. It is important to point out that this research was carried out before the current inflationary cycle and all of the turmoil in Westminster! The survey results were quite insightful though, and would likely be relatively similar if carried out in Ireland.

For a start, the top 10 issues that clients want to discuss with their advisers are in the following areas,

  • Retirement/pension planning
  • Tax planning
  • Brexit/political uncertainty
  • Inheritance tax
  • Future financial planning
  • Investment returns/dividends
  • Portfolio review/diversification
  • Global politics/likelihood of market crash
  • Pension drawdown
  • Pension transfer

Maybe no great surprises in the above? It is interesting though that there is nothing directly relating to protection of wealth in there – does financial security fade into the background during times of economic growth? Maybe this would feature more if the research were carried out today…

However, there were four questions that featured frequently in the concerns of clients – do they reflect the conversations that you are having with your clients?


Can I afford to retire?

This was the number one question that FT readers wanted to discuss with an adviser, with more than 20 per cent of respondents naming retirement and pension planning as their top concern. With state pensions providing only basic subsistence support to people, clients are rightly focused on how they will live when their income earning days are behind them. Retirement planning is a critical element of financial planning today through both the accumulation and decumulation phases of life. No surprises here!


How can I pay less tax?

Tax planning was cited by over 17 per cent of readers as a topic they wanted to discuss with a financial adviser. Many financial planners today are expert in tax matters and indeed many of you have additional taxation specific qualifications. This all makes a huge amount of sense as tax is a significant drag on wealth accumulation and good tax advice has a huge impact. Being a personal tax expert is a necessary requirement for advisers today.

This is an area of potential improvement for some advisers. Do you shy away from giving tax advice and guide your clients towards an accountant or tax adviser? Is this always the right approach? Can you really give expert financial planning advice without being a personal tax expert? I’m not so sure…


How can I reduce the impact of inheritance tax?

In addition to general concerns about tax, inheritance tax (IHT) was also a key, specific concern for readers. Although only 5 per cent of estates nationally (in UK) pay the tax, many readers nevertheless fear the impact of IHT — and need an adviser’s help to understand the system.

Of course you are all aware of how penal the Irish IHT system is, with thresholds slashed since the economic crash and IHT rates increased. When you layer increased wealth over the last decade and the recovery of property values, IHT can take a big chunk out of estates. There are ways of reducing these tax bills – you play a really valuable role in helping your clients to take advantage of them.


How will Brexit impact my finances?

Obviously this topic is not going to be of such concern to Irish clients. What it does demonstrate though is that clients rightly worry about significant external events beyond their control. One of the most important roles for you as a financial planner is to reassure clients and to keep them focused on the plan. You are all aware that irrational behaviour by investors is often the single biggest drag on growing wealth. You are the voice of reason, helping clients to keep a long-term perspective.


While these may be the most common questions that clients ask, one important point comes to the surface. The questions that clients have are about themselves and their money, not about the products that they hold. This further confirms the value that you add is as an expert financial guide… and not as someone who chooses the best products and times the markets.

Are you ready to answer the big questions of your clients?

The importance of structures in a family advice business

I became aware quite recently of a family business, thankfully not in the financial advice space, that had failed. Their products were excellent, their target market was big and while there were some competitors, they weren’t a huge threat in reality. This business should have succeeded but didn’t.

I was very fortunate to be given a candid review of why the business failed by one of the leaders of the business. As we peeled away where things went wrong, it became clear that a lack of structure in some key areas sat at the heart of this failure.

Here’s what I learned about what went wrong in this family retail business and how these mistakes can be avoided in family financial advice businesses.


Family businesses can be too informal

I see this quite frequently. Usually it’s a father who has been a financial adviser for many years. He is delighted then when his son(s) and/or daughter(s) come into the business. This happens quite informally – it might start with some summer work, in some cases it’s a case of “come in and give it a try and see if you like it” – always very well-intentioned on all sides. This then turns into something permanent and the business motors on, now with a parent and children involved. It all sounds good so far!

However this is where the family retail business started to slip off the rails. In hindsight, the dynamic remained very informal. There were no structures put in place that you would expect to see in a normal shareholder business. The following structures might have helped them succeed, and I think every family financial advice business should consider implementing them in their business.


Goal setting is key

This starts with a clear vision for the business. What is it that you want to achieve through your financial advice business? What is your guiding “North Star”, that when some members of the family become uncertain about changes in direction about to be taken, you can all agree that it is (or isn’t) bringing you closer to that ultimate vision?

Once the vision is set, it is important that the values of the business are identified and articulated. These might evolve and change over time – this in itself emphasises the importance of returning and reviewing them periodically. These should be standards for the business on which you’re not willing to compromise – for example, these might be around fairness and delivery standards to customers or how non-family staff are treated. All family members need to to agree them and abide by them.

And then you agree the shorter-term objectives and goals of the business, just as is done in any other shareholder business.


Governance keeps you accountable

How this is structured depends on the preferences of each family business. The key is that governance is carefully considered, and a conscious choice made, as opposed to just drifting into some informal governance structure.

For some family businesses, a “family leadership council” might be the best way to proceed. This is a group of some / all of the family who meet regularly, follow a defined agenda and document outputs and actions as to the future strategies of the business.

For other businesses, the family members might acknowledge that external oversight is needed, to properly challenge their own thinking, prevent “group think” and to sometimes act as a referee! There is no weakness in bringing in external people to help reach the right decision – I know that my sisters and I sometimes struggle to agree on something as simple as a restaurant for family dinners… External people can also bring a very useful and different perspective, where family members can sometimes get trapped down in the weeds of the day-to-day running of the business.


Clear communication keeps everyone on the same page

The final piece is to ensure everyone is aware of the challenges and issues facing the business and stays on the same page. Structured communication is key. This is particularly important in a family business, where some siblings might be closer than others, and of course some of the family members might be living under the same roof. You must be careful that the important conversations don’t take place at the dinner table, to the exclusion of other family members.

A family business can be the most rewarding experience, one of shared vision, collaboration and growth and shared satisfaction as you achieve your goals. Put the necessary structures in place to ensure these positive outcomes become the reality.