We have moved....

Blogger has been pretty good to me...however to ensure that my musings can be put in the same place as some of my other online activity we have transferred this Blog to my business website.  You can find our new home for the blog here:-

http://www.principalifas.co.uk/blog/

Please continue to visit us....your feedback is invaluable and motivates us to continue to write!  I look forward to hearing the comments on the new site soon!

Do professionals ignore social media at their peril?

Last week, I presented to a firm of IFA's about the benefits of social media.  The IFA's in question were all lovely chaps with a clear commitment to professionalism and working hard on behalf of their clients, but I'm sure they won't mind me saying this, didn't tend to engage or build connections online.  Actually, that's probably an understatement...many of them didn't have a Linkedin account, let alone Twitter or Facebook.  Whilst many of them run their respective businesses well, look after their clients well and possibly think that they didn't need online engagement in their "kitbag". I believe that choosing to ignore online engagement is a risk to any business of any size, but is especially dangerous to the small financial planning businesses.  Let me explain why...

Let's assume you've got an individual financial planner, lets call him Andy.  Andy has a portfolio of 80 clients he has looked after for a number of years and has a robust system in place to see his clients annually.  Andy is comfortable with his lot, but wants to work for another 5 - 7 years before he retires and sells his business.  He believes that his clients are pretty loyal as he provides a decent service to his clients.  Andy also sends out a 3 monthly newsletter both through the post and via email.

Many of Andy's clients are now on Twitter, Facebook and have been on Linkedin for a while and some of them have been following another locally based financial planner, Steve.  Steve provides a similar face to face service to his clients, although some of his clients are seen 6 monthly as opposed to annually.  He sends out a monthly newsletter (as opposed to Andy's Quarterly newsletter).

Thee main difference between the two advisers is that Andy believes that 'social media' is a fad and has decided that he "hasn't got the time" to worry about engaging with any of these platforms.  Steve on the other hand sees working with social media as an opportunity to build relationships, pick up useful tips, communicate with employers as well as other financial planners, provide high quality content to his clients, and share client experiences which might benefit his online connections (which will contain existing clients, prospective clients and fellow professionals).  Steve also isn't expecting any immediate benefits, but sees it as an opportunity to build his personal and professional brand.

Andy's not concerned about this, I mean after all....he has looked after his clients for some time and why would they shift elsewhere?  However, one aspect that Andy is ignoring is that whilst he communicates with his clients every quarter at the most, Steve is engaging with both his own, and Andy's clients every day via social media.  Andy's response to this is that his clients are loyal and will stay with him....and this might be true for some of his clients.  However, some of Andy's clients are looking at Steve's commitment to constant communication and delivering high quality content and thinking the "grass might be greener".  So, the question is....even if you are not looking to grow your business but just want to continue looking after your clients - is it worth ignoring the chance to constantly communicate with your clients to continue to show the service you provide is the place to be?

Andy might also state that you can't build trusted personal and professional relationships online, whereas Steve believes you can.  At one point I might have sided with Andy on this one....however a recent experience changed my mind...and you can read about this experience here.

I know I'm probably preaching to the converted if you're reading this blog....so I'm conscious that many of you are more like Steve than Andy.  However, if you're more like Andy, are you prepared to take the risk of not engaging online?

As ever, this blog provides me with an opportunity to share my thoughts and I'm always comfortable with a healthy debate....so, am I right or wrong?

Jobs, Children and Pride (part 2)

In a recent post I talked about my experience at my eldest daughter's open day recently.  If you haven't read part 1, you can find it here.  However, a broad recap is that Charlotte had a careers day at school and whilst the other children put far more glamorous jobs like Actor and Footballer....Charlotte said she wanted to be a "Principal Financial Solutionist".

So to ensure that I could never be accused of Nepotism, but mainly because I'd thought it would be quite entertaining...I decided that I'd give Charlotte a mock interview.  So, the day found out about this fact I arrived home from work and set up an interview space at the dining room table.  Charlotte was upstairs in her room playing with either her Moshi Monsters, Bin Weevils or GoGo Pets (I appreciate these terms will be completely foreign to many, but if you have kids of a similar age to Charlotte, you'll probably know what these are) so I called her downstairs.
Charlotte bounded down the stairs full of enthusiasm.  "Yes Daddy" She said.

"So" I said "I've heard from your  teacher that you want to be a principal financial solutionist".
Charlotte giggled and nodded.
"Well.....I can't just give you a job!  I'll have to interview you!".
"Okay Daddy" Charlotte said.
"Right....go outside, knock on the door and we'll start."

Charlotte went outside, knocked on the door and strolled in.  "Hi Daddy, erm, I mean Hello Mr Daems!" which resulted in a little chuckle from me....I didn't realise she'd take this so seriously!
"So Charlotte, how can I help?"
"I'm here for the job!"
"What Job?"
"Principal Financial Solutionist!"

"Right...." I replied trying to stop myself laughing "What makes you think you'd be good at the job"
"Well" Said Charlotte after some thought "I'm good with Numbers, Good with people, and brilliant at conversations."
"Brilliant" I exclaimed not expecting such an interesting answer "Okay, so tell me about the last time you had a conversation that went really well?"
I thought this question would stump Charlotte, and initially I thought it did.  She stopped talking, considered her answer and then repeated the question....

"hmmm" she said "when was the last time I had a conversation right well.....erm, This conversation we're having right now!"

I think we can learn a lot from our children.  Charlotte relished the challenge of the interview and answered every question I had for her with relative ease!  She's also constantly inquisitive and loves to ask questions to help understand the world around her, as well as being (mostly) very polite.  So, regardless of whether she decides to be an Actress, Footballer, Fireman or even of Principal Financial Solutionist, and if she retains her positive, curious and respectful attitude I'll continue to learn from her and will carry on being an incredibly proud dad indeed.

The Value of Advice - Income in retirement

I believe that the role we take as professional financial planners is about ensuring that we work hard to ensure we can improve the financial situation of our clients by using our knowledge and expertise.  I was recently asked on Twitter to effectively "put my money where my mouth is" and show how the work we conduct with our clients improves their financial situation, and whether the additional cost of using a financial planner is justified or not.

Firstly I'd like to make an important point.  As a business if we don't believe we can do this we simply won't take on the clients case.  It's a simple as that, but the important question is....how do we illustrate this to ourselves and our clients?  Whilst there are a number of examples I can give, I'd like to based my first example which is pretty similar to a case we worked on recently.  However I've taken a 'case study' approach to protect the identity of the client in question but provide an example of how we can genuinely add value.  

It's also important to note that nothing in this Blog entry constitutes advice but was appropriate for the client in question and is based on figures which were correct at the time of publishing this post.  If you're reading this, please seek professional independent advice before making any decisions about your circumstances as the conclusions contained in this entry may not be appropriate for your individual circumstances and requirements.

The client in question, let's call him Stephen, had 'money purchase' pension pots with a total value of £220,000 (after he had taken the 25% cash allowance).    After a comprehensive meeting so that we we're able to understand his financial needs, he decided that he wanted to purchase an annuity (an income for life) to fund his lifestyle in retirement.  Stephen had been a smoker for a number of years, was diabetic and had a couple of other health issues which we took into account when conducting the required research for the most appropriate income option.

Stephen was 65 and had been offered an income of £11,760 per annum from his current providers.  By conducting detailed research and fully understanding the clients health situation, attitude to risk and other important factors we managed to source an income of £14,880 for the same pension pots as well as making sure he selected the right benefits for his individual needs.  He also had support from us in processing the applications efficiently, a professional who could explain the relevant terms together with a helping hand through the process, some to speak to underwriters and providers on his behalf as well as access to our experience and knowledge in ensuring the solution provided was appropriate to meet his needs. 

At our initial meeting, we discussed with Stephen the cost of the service provided and after we had given some thought into the total time taken to work on his case and decided that an appropriate cost for the work conducted (for this element of his advice) was £1800.  Let's assume Stephen lives for another 15 years:-

Income of £14,880 for 15 years - £223,200

Income of £11,760 for 15 years - £176,400

Cost of Advice - £1800

Total Difference - £45,000

Therefore in this case, and based on certain assumptions, the client is £45,000 better off over a 15 year period than he would have been.  However there is another counter argument, on this occasion, to seeking professional advice.  Why doesn't Stephen take the DIY approach and conduct the advice himself using online tools (like the Money Advice Service annuities calculator).  In this case study, Stephen runs a successful computer business.  Whilst Stephen potentially could take the time to understand the annuities market, conduct the research required and chase product providers, he would need to calculate the time taken to do this and balance this between the cost of the time taken out of running his business.  Whilst with some individuals the decision would be to take the DIY approach, for Stephen it was clear that the time was better spend within his business, or alternatively spending the time saved doing what he enjoys.

Therefore on this occasion the value of taking professional independent financial advice is patently clear...what do you think? 

TV, Essex and being known

There's a TV programme I'm finding myself talking about more and more recently.  It's not my usual viewing fare and to be honest I've only seen it a handful of times, and I'm not defending myself, but it's usually when Cassie my wife has it on and I'm on the sofa working on the laptop.  It's the televisual version of Marmite....it's either loved or hated and there tends not to be too much middle ground.  So, what's this programme I speak of, which sparks much debate?  Is it a hard hitting revelatory documentary series or the latest 'controversial' comedy?  It's actually a show called "The Only Way is Essex".  It seems that everyone I speak to is at the very least aware of the show even if they haven't seen it.  However if you haven't you can find out about the show (via it's Wikipedia entry) here.

I've got to say I'm not a fan.  Whilst I appreciate it's an 'entertainment' show, the marketing spiel used to promote the programme does say "It shows real Essex people" and gives the impression that Essex is full of people who spend their lives at various social events, parties and not much time in the 'real world'.  Whilst half of the clients I meet at London based, the remaining half either live, work or run businesses in Essex.  My impression of the typical individual who lives in Essex are intelligent, entrepreneurial, hard working people who are about as far removed from the typical TOWIE cast member as can be.  I understand that the programme can only portray a certain aspect of the community within Essex and that's understandable....however a true representation of the majority of us it's not.  One redeeming factor of the show is there are examples of individuals running relatively successful businesses.  Whilst I understand it's "light entertainment" and I'm not expecting TOWIE to be an Essex version of "The Apprentice", I'd like to see more of this aspect of Essex Life instead of the interpretation that all we are interested in is fake tan, nightclubs and dating.

My other issue with this show is that it reinforces the relatively modern belief that the only route to success is to be 'famous for famous sake'.  As many of you know, I have two daughters (Charlotte, who's 8 and Sophie, who's 6 months old) and I'd rather reinforce my belief that it's more important to be known for high personal and professional standards, hard work and integrity...as opposed to just being 'known'.  As always, these are just my thoughts...so, what do you think?  Do you disagree with me and think TOWIE is a true reflection of Essex?  Should I see it as just an entertainment show and not look for any other context?  What do you think the best reflection of your local area is?  I look forward to hearing your thoughts....

  

Songs of the Week...

So, it's Friday again, and you know what that means.....it's time for songs of the week!


Just Jack - Writers Block




Not only do I love Just Jack, and the album this comes from Overtones....I'm struggling to write a meaningful blog entry today....so it feels quite apt!


Mumford and Sons - Roll away your Stone





One of my favourite songs from the men who made Folk Rock popular again....I particularly love the slow build up!




Jack Penate - Torn on the Platform




One of my favourite artists....great live, and a fantastically entertaining video for a superb song!

State pensions and why there are 3 steps to a clearer plan.

When planning for your retirement there are 3 broad steps to understanding what you need to do to achieve the lifestyle you want.  Firstly, understand what kind of lifestyle you want in retirement, together with what this might potentially cost.  Secondly, understand what provisions you have in place at the moment.  Focussing on these two steps allows you to look at the third part of the process, calculating the shortfall and putting a plan in place to ensure you are able to achieve this.

Whilst I could talk about each part of this process in depth I want to share with you a tip today which will provide you with a more accurate figure when working out you have for your retirement at the minute, therefore making the numbers you are working with in the third part of the process more realistic.

When initially working with new clients we talk through their current provisions in depth.  This might include income from private pensions, investments or property.  However one of the areas which many individuals don't take into account is the pension income they receive from the state.  So, my tip for today is understand what you're entitled to in retirement from the state.  It's highly unlikely that the state pension on it's own will be enough to live the lifestyle you're looking for, however it's an important part of the picture and therefore worth taking into account.

Getting a forecast of your state pension is relatively easy.  The first option is to use the State pension E-Service, an Online service which allows you to receive a projection via the web.  If you prefer to use more traditional methods you can also complete a form ( called a BR19 ), Send it to the state pension forecasting team and receive a document back in due course confirming what you're entitled to.  This will allow you to have a clearer picture of your current provisions to making calculating your "shortfall" easier and having a far more robust plan to your future retirement.