Financial planningRichard Allum CFP APP

Those that can’t see the future.....

Those that can’t see they can’t see the future…

“A professional service for clients who need objective assistance in organising their financial affairs to achieve their financial and lifestyle goals”

Is cash flowplanning compulsory?

Institute of Financial Planning

Lifetime planning

Estate planning

Savings strategies

Investment risk

Shortfalls

Getting real

Creating ways to help people make more sense of money

Framing

Context

Engagement

“Financial plans are worthless”

“The process of planning is invaluable”

Planning process

1. Establish goals & objectives

2. Gather data

3. Analyse information

4. Develop plan

5. Implement plan

6. Monitor and adjust

Things in common

1. Clear service proposition

2. Platform & investment process

3. Agendas

4. Questionnaires

5. Team approach

6. Charge

Data, objectivesand assumptions

“One of the keys to successful financial planning is learning to let go of precision.”

Carl Richards @behaviorgap

No objectives..no plan!

• Clear & concise

• Prioritised

• Timescales

• Agreed & written down

• Reviewed regularly

Financial objectives

• Increase my spendable income

• Pay less tax

• Improve retirement income

• Increase investment returns

• Pay off mortgage

Emotional objectives

• Increase my financial security

• Achieve financial independence

• Safeguard my family

• Understand more about my money

• Give more to charity

As a minimum maintain the lifestyle I want under any circumstances however long I live

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?

Assumptions

• Inflation

• Earnings growth

• Investment returns

• Tax

• Mortality

• Capital conversion

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%

Assumptions

In principle, simply as a planning assumption.....

If you can’t fault the assumptions, it’s reasonable to accept the conclusions......

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

Liquidity ratio

21% Cash & investments

£210,000

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 ???

Plan structure• Cohesive document

• Logical progression

• Language

• Style & content

• Action plan

• Presentation options

Reviews

• Essential

• Review everything

• Assumptions

• Process

• Presentation

Manage expectations

Key roles

Adviser Paraplanner

Leads relationship Gathers data

Presents plan Analysis

Provides advice Prepares plan

“A poor financial planner is a poor financial planner”

David Norton

Cash flow planning

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

Making sure you don’t run out of money!

Multiple scenarios

• If all goes to plan

• Someone dies

• Serious illness

• Retire early

• Sell business.....

Risk profiling

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?

Investor behaviour

“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

Cash flow tools

The market

The market

Calculators

Excel

Calculators

Goal seek

Solutions

Benefits

• Better client relationships

• In control

• Greater fee income

• Generational planning

• No market moans!

Useful resources

A good read

www.moneyscopehq.com