Why you should think about Financial Planning and not Financial Products.

I recently had a meeting with a new prospective client.  They had recently received some money from the sale of a property and wanted to know where to invest the funds.  We discussed their financial affairs, income and expenditure, assets and liabilities, attitude to risk, and hopes, aspirations and dreams and left to give some thought about the best way forward for them.

They were keen to discuss the opportunity to invest, and in particular invest to produce income (as they had a relatively low disposable monthly income).  However after reviewing their circumstances in detail, one thing became abundantly clear.  The clients in question had a number of credit cards and loans where the interest paid on them were relatively high.  Paying off this debt would provide them with more net disposable income, ensured that they wouldn't be incurring the high levels of interest they were paying and put them in a healthier financial situation than investing the money they had.

Whilst there are potential downsides with taking this approach, and we discussed all our recommendations with our clients in detail to ensure that they are comfortable with the recommended approach (together with ensuring that they understood the importance of reviewing their financial affairs regularly), on this occasion paying off these liabilities made sense.  The best advice for this particular client didn't involve putting in place a "financial product".

There is a common misconception about what we do as financial planners is sell financial products.  For our business, this isn't the case.  What we actually do is provide a professional financial planning service which may involve a financial product....but often may not.  The focus for us is always on what's right for our clients in relation to their needs...if this doesn't involve a financial product, that's fine.....if it does, that's fine too.

So, next time you look at planning for your financial future, ensure that you ask enough questions so that you understand that the professional you choose to work with is focussed on your needs, and takes into account all potential options, not just the ones which involve a recommendation of a financial product.

Jobs, Children and Pride (part 1)

At my daughters school recently they had a "careers day".  She was only seven at the time (now eight) so the conversation about what job's they may want to do when they are older was kept relatively broad....however something surprising came out of her choice of jobs.

The first I knew of this surprising choice was when I attended Charlotte's parents evening.  We sat down with the teacher and as always I was trying to get relatively comfortable on a chair designed for an 8yr old (and not particularly comfortable for someone over 6ft) the first question from Charlotte's teacher was an unusual one...

"Mr Daems, What's a Principal Financial Solutionist?"

"I'm not sure!" was my reply "Principal Financial Solutions is the name of my business, but I don't know what a Principal Financial Solutionist is!  Why do you ask?"

Charlotte's teacher then guided me to their "careers board" where all the children had an individual card to put what jobs they wanted to do when they are older.  There were plenty of actors, footballers, nurses, a couple of teachers and one or two fireman....but on Charlotte's card she had put that she wanted to be a "Principal Financial Solutionist".

Whilst I'm not sure that Charlotte knows what we do as a business (her broad understanding is that "we help people look after their money"), and I'm sure that she will change her mind quite a few times before she decides on her eventual career, the fact that she was proud enough of what I do every day to put this down is actually more than enough for me.

Now, whilst I was immensely proud of the fact that Charlotte had put this down on here board, I didn't think it was fair to give her a job straight away.....so she had to interview for it first (I don't want to be accused of Nepotism!)....the results of which I'll tell you about in a later Blog Entry...

A little run in the park

I know I've mentioned previously in this Blog that I was running the Greenwich 15k in aid of Richard House....well this Saturday (the 9th March 2012) the run was completed.  I'm not a natural runner and therefore didn't have the fastest time in the world, but the aim was to finish....and finish I did!

To be frank, I've had easier Saturday mornings, but the fact that my 8 year old daughter completed the 2 kilometre run for kids at the start and then ran with me in the last 200 metres shouting encouragement all the way seemed to help.  It also helped that I continued to see Richard House T shirts on the way round and we tried to give each other encouragement as we passed each other.

Everyone did fantastically for Richard House, including my Running buddies Ted and Clive as well as Hannah, Sarah and Navdeep.  My daughter Charlotte and Clive's daughter Anna also showed the adults how it was done in the Children's 2k.

After the Run, Clive, Ted and I enjoyed a post run beer (by the time I'd finished it was lunchtime) and discussed what challenge to set ourselves next.  I think I volunteered to try a half marathon, although I hope they were using the old name for Snickers...I think I could manage that!

In case you are feeling generous and would like to support the great work Richard House continues to do, you can sponsor us here....and thanks for all your kind words of support on Twitter, Linkedin and Facebook!

The importance of professional development

Written for the GAAP web blog

We’ve got a set routine in our house.  Every day, when I come back home from a day in the office, I always try to take the time to ask my eight year old daughter the following questions.  Firstly, “How was school?”, and secondly “Tell me something new you have learned today?”

Some days she tells me she can’t remember, other days she tells me that she has learnt nothing new.  However on most days she can tell me at least one fact she knows now that she didn’t know yesterday.  Sometimes as adults we all forget how important learning is.  Life is busy with work, family and much needed time to relax.  However as professionals surely we have to take the time out of our busy schedules to continue developing our knowledge and skills?  I believe we do, and I want to share with you the reasons why.

Firstly, our clients, regardless of the profession we work in, pay us for our advice.  I’m a firm believer in ensuring that within my business, our clients receive good value for what us they pay for our service.  Therefore surely it makes sense that to ensure that we provide the best possible value, our knowledge needs to be constantly and consistently up to date.  This comes from consistent learning and taking your professional development seriously.

 

Let me illustrate my second point with a theoretical example.  Two candidates go to an interview for a job within their sector.  Both are absolutely equal in attitude, skills and qualification.  However there is one key difference in the two candidates, one can evidence that they have continued to learn and develop since initially qualifying and the other is unable to. 

Now, put yourself in the shoes of the interviewer...who would you pick?  Whilst I’m not arguing that being able to evidence ongoing professional development is the main factor in finding the ideal position for you, I’m sure you agree that in today’s competitive market any opportunity to stand out from the crowd should be taken. 

Thirdly face to face professional development with expert speakers provides you with a number of additional opportunities.  It allows you to network with fellow professionals, build connections, share best practice and evidence to your peers you are serious about your careers.

So, take some time out of your busy day to do what most children do as a matter of course, learn.

My Top 3 Google Doodles....

Like many of you, the website I use the most and start virtually every day with is Google.  Whilst the search engine is obviously incredibly very powerful, my favourite aspect of using Google is the changes they make to their logo every now and again to commemorate certain events....The Google Doodle.  Here are my favourites:-

Valentines Day 2012


For all you romantics out there, a short cartoon displayed on the Google frontpage on Valentines day this year...I love both the sentiment and the music on this one.  You can't beat a bit of Tony Bennett on Valentines day.

PacMan

Being a child of the 80's and a man who loves computer games (my first computer was a Commodore 64 - do you remember them?)...this one was both nostalgic and fun.  I can log onto Google and have a quick game of Pacman in the process..brilliant!

Les Pauls 96th Birthday Google Doodle

A guitar you can play on the Google Homepage is a Fantastic idea!  I'm just wondering what instruments they will come up with next?  Personally, I'm waiting for the piano or possible the glockenspiel! 

So, these are my favourites....what are yours?

Pets, The Guinness book of Records and Serious illness

One of my favourite Christmas presents I received this year was the Guinness book of records 2012.  It's   full of bizarre and incredible facts, most of which you will never use, but all worth knowing anyway!  However whilst flicking through the book the other day, nestled away on the top page 149 was this fact:-

"In it's lifetime, the average dog will cost it's owners £6746 and the average cat £4950"

So, why did this fact catch my eye....and why are these figures so important?

A recent survey by Aegas Protect confirmed that based on a survey of 3000 individuals, 12% of Adults in the UK have pet insurance when compared to 9% who had a critical illness policy.

We all know that people love their pets, however their seems to be a lack of perspective for the people who have been survey which tends to illustrate why critical illness is less popular than pet insurance.  Firstly, let's consider both the financial and emotional impact on you and your family if you suffered from a critical illness (for instance a serious form of Cancer).  

You may be off work for a prolonged period of time while you recover and still have a monthly mortgage payment to cover.  You may not be able to work again, or you might want to pay debts off if you do suffer from any form of critical illness...you can see how these costs could quickly build up in the event of your suffering from one of these illnesses.  However the right level of cover is always personal and based on your thoughts and feeling in this area.  It's always worth speaking to a financial planning professional about the best route forward.

However, regardless of your circumstances....it's likely that the level of cover provided in the event of your suffering from a really serious illness is more than the total costs of looking after a pet.  I have critical illness cover with a sufficient amount to pay my mortgage off and then a little more to provide an additional level of financial security in the event of a critical illness.  My thought process is that the only thing I want to worry about if I ever suffered from a critical illness is recovering from said illness.....the last thing I want to concern myself with is money.

Therefore the financial impact of the ill health of a pet is far less than the financial impact of my ill health....Also, apart from the odd exemption (like the cute dog from the Oscar winning film, The Artist) there aren't many pets who can go out and earn a crust on your behalf.  This is why I believe Critical Illness cover is more important than pet insurance....but as ever, I'm open to other opinions.  What do you think?

Approaching retirement? Why you shouldn't go for the easy option

So, imagine you're approaching retirement and wondering what to do with your money purchase pension scheme.  You receive a pack highlighting the fact that you have the opportunity to either take the annuity (where you convert your pension pot into an income) offer from your existing provider or shop around for the most preferential deal.

Whilst there are now alternative options to buying an annuity most people still opt to buy an annual income on all or the majority of their pension fund.  For someone who wanted to take this option the easy route would be to sign the form within the pack and take one of the income options available through your existing provider....right?  Well it may be the easy route, but how much you could be losing out by taking the easy route and not shopping around?

Well, according to this Article from the Telegraph published last year UK pensioners lose 3.3 billion pounds a year (based on research from the Oxford Economics and PICA) by going for the easy option instead of shopping around for the best possible income they can receive from their pension fund.

The potential additional amount you may receive at retirement by shopping around for the best income depends on a number of factors, however it's always worth consulting your independent financial adviser to help you with this or alternatively, if you prefer to conduct some initial research, the Money Advice Service provide a useful annuity comparison tool to provide indications of how much you potentially may receive.

One important factor many people approaching retirement don't consider is how if that individual has poor health, are overweight, or are smokers may potentially increase the income they receive in retirement due to these factors.  For individuals who fall within these categories, it's even more important to ensure that they shop around for the most appropriate arrangement.

It's also important for someone approaching retirement to understand what the options are available when selecting the best income and consider whether you want Fixed or Increasing retirement income or a guaranteed period.

So, when it comes to selecting the most appropriate income at retirement....ensure that you take that time to select the best income possible.  The income you choose is likely to be with you for the remainder of your life....why not make it the most attractive it can be!