financial planning for ifp london
DESCRIPTION
Richard Allum's slides from his presentation on financial planning delivered at a meeting of the IFP in London on 1 May 2012.TRANSCRIPT
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Financial planningRichard Allum CFP APP
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Those that can’t see the future.....
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Those that can’t see they can’t see the future…
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“A professional service for clients who need objective assistance in organising their financial affairs to achieve their financial and lifestyle goals”
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Is cash flowplanning compulsory?
Institute of Financial Planning
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Lifetime planning
Estate planning
Savings strategies
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Investment risk
Shortfalls
Getting real
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Creating ways to help people make more sense of money
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Framing
Context
Engagement
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“Financial plans are worthless”
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“The process of planning is invaluable”
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Planning process
1. Establish goals & objectives
2. Gather data
3. Analyse information
4. Develop plan
5. Implement plan
6. Monitor and adjust
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Things in common
1. Clear service proposition
2. Platform & investment process
3. Agendas
4. Questionnaires
5. Team approach
6. Charge
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Data, objectivesand assumptions
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“One of the keys to successful financial planning is learning to let go of precision.”
Carl Richards @behaviorgap
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No objectives..no plan!
• Clear & concise
• Prioritised
• Timescales
• Agreed & written down
• Reviewed regularly
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Financial objectives
• Increase my spendable income
• Pay less tax
• Improve retirement income
• Increase investment returns
• Pay off mortgage
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Emotional objectives
• Increase my financial security
• Achieve financial independence
• Safeguard my family
• Understand more about my money
• Give more to charity
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As a minimum maintain the lifestyle I want under any circumstances however long I live
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Key phrases
• So what?
• Why?
• What would need to happen for...?
• Can you afford to do the things you want?
• Do you have enough time to do them?
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Assumptions
• Inflation
• Earnings growth
• Investment returns
• Tax
• Mortality
• Capital conversion
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Real value of money
Assumption Notional Real
NAE 4.5% 1.5%
Savings 2.0% -1.0%
Investments 6.0% 3.0%
School fees 6.8% 3.8%
House prices 3.0% 0.0%
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Assumptions
In principle, simply as a planning assumption.....
If you can’t fault the assumptions, it’s reasonable to accept the conclusions......
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Net worth
Asset Value
Property £500,000
Cash savings £68,000
Investments £142,000
Business interests £250,000
Personal effects £50,000
Pension funds £230,000
Total £1,240,000
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Liquidity ratio
21% Cash & investments
£210,000
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Budget
Source Amount per month
Fixed expenses £2,150
Variable expenses £1,100
Total expenses £3,250
Gross income £6,500
Net income £4,575
Disposable income £1,325
Spendable income ???
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Plan structure• Cohesive document
• Logical progression
• Language
• Style & content
• Action plan
• Presentation options
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Reviews
• Essential
• Review everything
• Assumptions
• Process
• Presentation
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Manage expectations
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Key roles
Adviser Paraplanner
Leads relationship Gathers data
Presents plan Analysis
Provides advice Prepares plan
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“A poor financial planner is a poor financial planner”
David Norton
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Cash flow planning
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Show client.....
• If on target
• What return is needed?
• How much more ..... is needed?
• When (or if) they can stop work
• How much they can give away
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Making sure you don’t run out of money!
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Multiple scenarios
• If all goes to plan
• Someone dies
• Serious illness
• Retire early
• Sell business.....
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Risk profiling
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A solution• Robust, repeatable process
• In-depth discussion
• Full understanding of risks
• Don’t rely on risk profile tools
• What return is needed?
• Is any risk needed?
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Investor behaviour
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“We took risks, we knew we took them; things have come out against us, and therefore we have no cause for complaint.”
Robert Falcon Scott
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Cash flow tools
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The market
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The market
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Calculators
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Excel
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Calculators
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Goal seek
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Solutions
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Benefits
• Better client relationships
• In control
• Greater fee income
• Generational planning
• No market moans!
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Useful resources
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A good read
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