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?
Financial matters and pensions in particular are becoming incredibly complex. I have worked in financial services for over 28 years and am likely to have more knowledge than the average client (I was even qualified to the level that I could give advice). But I still use independent financial advice - the above example is a clear illustration of why it makes sense (and is good value) - regardless of your level of knowledge.
ReplyDeleteAgreed...and thanks for your comment. I've got clients who you would assume had the knowledge and skills required to make these sort of decisions.
ReplyDeleteHowever, whilst they are specialists in their field (even in the financial sector) they don't tend to have the expertise, knowledge or time to do the job...I suppose I should be thankful! It keeps us in business!