One thing common to almost everyone we speak to, from busy medical professionals to those working in tech or pharma to business owners and beyond is that they are time poor. They are constantly busy managing careers and family. Very often they do not have a properly thought out financial plan for themselves and their dependents.
A financial plan is an analysis for you and your family of current and future financial affairs. Inputs include details of your current assets, current income and spending, projections about future income, provision for future expenses, long term saving and investing, insurance, taxes and more. A full financial plan will also incorporate retirement and estate planning.
Why is a financial plan so important?
We all have financial goals and objectives, but because we are time poor often fail to document what they are and do not work to a well thought out plan. Without a proper financial plan, it’s difficult to know whether you and your family are on track to secure your financial future.
For young families this may include things like planning for third level education costs, ensuring the correct amount of life or income insurance is in place, and understanding how to increase the chances of a comfortable retirement.
As we go through life, the financial plan is crucial for more detailed modeling of retirement expectations, managing financial risk, how to draw down income post retirement, thinking about estate planning and more.
What role does a financial adviser play?
An adviser will analyse and illustrate your financial situation, providing you with solutions tailored to your individual circumstances. This will include researching all options, explaining how complex financial products work, documenting the plan and meeting for a review at least annually.
Using a professional adviser takes emotion out of analyzing financial decisions. It gives you access to someone who knows about investments, financial protection, and constantly changing rules on taxation and pensions. It provides you with someone to educate you and your family on how to achieve your financial goals and objectives.
At Ardbrack Financial we use state-of-the-art financial planning software from ‘Voyant’ to illustrate how you are spending your money now and forecast your lifetime family cashflows. For example we model the current and projected future annual income of a fictitious couple in their mid-40s in the first chart below, and in the second chart include expenses and highlight where shortfalls occur. We can then make recommendations about how to address the shortfalls.
Chart 1: Expected family lifetime annual income
Chart 2: Expected family lifetime income and expenditure (projected shortfalls in red)
Current Investments and Risk Profile:
Another key part of the financial plan is analyzing existing assets and liabilities, from savings accounts to pension or investment holdings in property, stocks, bonds or other assets. Your risk profile should be analysed on a regular basis to ensure it continues to match your financial goals and objectives. Our plans show this breakdown visually with an example in chart 3.
Chart 3: Sample breakdown of saving and investment accounts
Your Goals & Objectives
Our financial goals and objectives change as we go through life. These should be incorporated into your financial plan as additional insurance, savings or investment needs or tax planning arise. Examples of when changes might need to be made to your plan include:
- Getting married
- Having children
- Change of employment
- Starting a new business venture
- Buying a home (or downsizing later in life)
- Acquiring a windfall or inheritance
- Retiring from employment
- Becoming ill
“I already have a pension”
Financial planning is not just about pensions, but the quote above is something we hear regularly. Equally as often we quickly find out that the pension account is inadequate. Whether you work as a private sector employee or are a self-employed business owner, you should know the following:
- What assets your pension savings are invested in.
- Whether you and/or your employer are contributing enough.
- Whether you are making full use of tax relief available.
- What is a reasonable projection of your retirement income?
- Whether the investment risk profile of your pension fund is appropriate for you.
- The total costs you are paying. (Hint: it’s not just an ‘AMC’)
If you cannot answer any of the above, or are just unsure, we would suggest you review your affairs. This is too important not to have a handle on.
Scenario Analysis “What if”
Our financial planning software enables us to run multiple “what if” scenarios to compare with your base financial plan. These might include a projection of family cashflow in the case of one income earner becoming ill for a time, changing your investment mix, or a projection of how your finances might look in the case of taking early retirement.
Chart 4: Comparison of future cash-flows upon retirement at age 65 to early retirement at age 60.
The Financial Plan: How does it work?
We first sit down with a potential new client to discuss our services and get to know a little about what they might need. We do not charge for this initial consultation.
If we both agree to proceed, we will outline our terms of business and fact finding process. We will show you a sample of what the plan will look like, and give you a fee quote for preparing the financial plan. This will depend on the work involved. The next meeting will involve presentation and discussion of the financial plan, answering any questions you might have. We will provide you with a statement of suitability if the plan includes recommendations about for example: financial protection, starting a new investment, starting pension saving or consolidating existing pensions. However there is no obligation to follow our advice about further products or services.
We will follow up with you annually or more frequently for complex cases. A fee may be chargeable for future plan update meetings, or this cost may be waived where we charge an ongoing management and monitoring fee for assets we advise on. Our charges will always be clearly documented and agreed in advance.
Please use the contact details below to arrange a no-obligation meeting at our offices in Kinsale or at your place of business.
Ardbrack Financial Ltd.
Disclaimer: The content of this article is for general information purposes only. It does not constitute investment advice as it does not take into account the investment objectives, knowledge and experience or financial situation of any particular person or persons. You are advised to obtain professional advice suitable to your own individual circumstances. Ardbrack Financial Limited makes no representations as to the accuracy, validity or completeness of the information contained herein and will not be held liable for any errors or omissions.
Ardbrack Financial Ltd is regulated by the Central Bank of Ireland