FINANCIAL HEALTH: Is financial advice primarily about money?

Our finance expert Raj Shah on the real reason behind wealth planning

In last month’s article, I shared my thoughts on the wisdom (or rather, not) of investing in gold. This month, to coincide with Financial Planning Week from 5-11 October, I discuss the importance of having a financial plan and what a financial plan really is. Hint – the clue is in the title.

When people ask me what I do, some of the most common questions I am asked are ‘what rate of return can you get me?’ and ‘what’s your track record?

My answer is that before I can start to even think about rate of return, the first, most important thing for both of us is to get a complete understanding of your most cherished goals. In other words, what and who you are investing/planning for. Next, we work out how much capital you are going to need in order to achieve those goals. Then we begin to create a financial plan appropriate to those goals.

Many advisers produce a ‘financial plan’ when engaged to deal with something specific by a client such as sorting a pension or investing some money. Very often such a document is not a ‘financial plan’ in the true sense, rather it is a product recommendation prepared once the adviser has gathered some data and carried out a ‘risk level’ assessment. This type of ‘plan’ will explain why the (usually a) product being recommended is suitable.

The distinction between these two types of plan is critical.

A high-quality financial planner will craft (and continue to work on) a plan tailored to your individual goals. Such a plan should cover:

  1. If the main earner and/or house person dies prematurely or suffers a serious illness, your family’s lifestyle will not be fatally compromised.  They will remain in the family home, education plans will remain financially on track, your family’s business, if there is one, won’t have to be sold at a disadvantaged price.
  2. You will be able to meaningfully support your children (education, property ladder etc) without sacrificing your own standard of living.
  3. You will be able to retire (or when work becomes optional) in your own time and on your own terms. Your dignity and independence will not be undermined by up to three decades of rising living costs.
  4. You will be able to look after your parents and the planning will ensure you don’t become a financial burden on your next of kin.
  5. You will be able to leave a meaningful legacy for your next of kin.
  6. Lastly, inheritance tax will be mitigated as much as possible – to ensure as much of your hard-earned wealth passes to the next generation or to the entities of your choice rather than the general coffers of HMRC.

A true financial plan is much more than a product recommendation report – it is a bespoke document covering most eventualities and ensuring that those you care most about will be well catered for should anything adverse happen and that you remain on track to achieve your most cherished goals.

A high-quality financial planner understands that financial planning (and subsequent advice) isn’t primarily about money –
it’s about love.

Raj Shah is founder of Blue Wealth capital and has been shortlisted for Financial Planner of the Year and Investment Adviser of the Year.

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