When we consider what the future may look like, many would place financial security high on their list of priorities. Once financial objectives have been set, it takes forward thinking and planning to achieve those goals. Whilst it is possible to create a plan yourself, using a financial planner can provide expert advice and reassurance, help identify areas that you may not have considered and save time too. In this article, we look at some of the key ways that financial planning can help achieve investment goals.
When people first engage with a financial planner, one of the key areas to agree upon are the financial objectives that need to be considered. Identifying a priority order is an important step to take, to obtain a clear view of the most important areas to tackle first. Objectives can change over time, and at different stages of our lives, our priorities will evolve. For example, a young family looking to purchase their first home may well be focused on obtaining a mortgage or protecting their family in the event of death or ill-health. Whilst long-term saving and pension planning would naturally be desirable at this time too, affordability may well dictate that these areas take a lower priority for the time being. Other life events that can lead to a significant shift in financial priorities are reaching retirement age, getting married or facing divorce.
Financial planning is a personal process. Everyone has a different set of circumstances, goals and attitude to risk, and it is therefore not possible to create a financial planning template that best suits every possible situation. Engaging with a qualified financial planner can introduce solutions and opportunities that may not immediately be apparent. These solutions and ideas can vary from ways at which income tax liabilities can be reduced, to investment advice to reduce risk and diversify an existing investment portfolio. Taking a holistic view can also identify gaps in a financial plan, such as the need to arrange additional protection, to establishing a plan to fund school fees or university costs in the future.
None of us know what the future holds and even the best laid plans may need to adapt to a change in circumstances. Advice is perishable, and a particular course of action may need to be altered as circumstances change. This is why reviewing your finances on a regular basis is so important, as it provides the opportunity to consider whether you’re on track to meet your goals, and understand how existing plans and arrangements may need to adapt.
Holding a formal financial review at least once a year can also be the ideal time to look at annual planning opportunities, such as using the Individual Savings Account (ISA) allowance, making additional pension contributions, or selling assets to use your Capital Gains Tax allowance. It can also make sure that your finances are not affected by any changes in legislation that have occurred since the previous review.
Investment is a long-term process and markets will go through bouts of volatility from time to time. Behavioural finance studies show that investors can make rash decisions to sell investments when market conditions are difficult, which may not be the correct course of action to take. It is at this point that the true value of financial planning advice can be found. Speaking to an adviser can provide reassurance and a calm voice through market turmoil, helping you focus on the longer term and taking an impartial view of your overall financial position. A good adviser can also suggest changes to asset allocation if appropriate and highlight opportunities.
Whilst some people are happy to create and manage their own financial plans, many would prefer to work with a financial planner to help achieve their investment goals. Life is busy and it can be difficult to find the time to properly review and consider existing financial arrangements. Engaging a financial planner can lighten the burden and provide peace of mind that a professional is keeping abreast of financial markets and reviewing the investment plan.
Holistic financial planning can add significant value in terms of guidance, planning and reassurance. Over the longer term, it could also boost returns. A study carried out by Vanguard in 2020 found that working with an adviser can help increase investment returns over time, through added value achieved by behavioural coaching, rebalancing of portfolios and use of annual tax exemptions. Vanguard estimate that these factors could potentially add around 3% per annum in additional returns. Naturally, there are some caveats, in that investment market performance can vary from year to year, and the monetary benefit of using an adviser will vary accordingly. The study is, however, an interesting attempt to quantify the benefits of engaging with a financial planner.
Using a financial adviser to create a plan, and undertake regular reviews, can provide many benefits, from tax planning to guidance and reassurance. Using a Chartered firm brings further comfort that the advisers are highly qualified, and the business will aim to deliver the highest standards of professionalism.
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Tax treatment varies according to individual circumstances and is subject to change. The Financial Conduct Authority does not regulate tax advice.
