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?