What do advisers actually do!?
If you feel like you are staring into a scary financial chasm and need help BUT you have not a clue what a financial adviser actually does, here is a starter for 10 on how they can help.
Most financial planners will:
Look at all your financial affairs from mortgages, savings, investments, pensions and yes, even those spending habits too. Those takeaways and coffees do add up :0)
Make sure you’re as tax efficient as possible
Utilise your annual tax allowance every single year where possible
Implement structures to manage your money
Manage your investments in ISAs and pensions for example
Give you a good grasp of how much you can spend and what you can afford
Educate you and give you confidence in the plan so that you feel more in control and less stressed about money
Help you find answers to some of those questions about when, where and how – from a financial perspective
And possibly, be a person you can rely on to look after your dependents if the worst happens.
Cash-flow modelling… sorry, what?
Planners will also run something called “Cashflow Modelling” an exercise which is based on your goals, where you’re at now and what you may want to save for.
They will create scenarios for you based on “what if” circumstances. And plans can be stress tested so that you can see worst case scenarios. Ultimately, it’s a way to visualise, and work towards, a better financial future.
Finally, there are times in our lives when we need some specific answers in relation to those life events which crop up and bring financial implications. Here are 5 common events which make most of us feel like we need someone to take charge and tell us what to do! Don’t be afraid to look for an adviser who will offer a finite package of services, around a specific event for a fixed £ fee.
Never fun and typically financially complicated. Advisers can help put some logic into discussions about maintenance and childcare payments, using a tool called 'cashflow modelling'. What do the kids actually cost to support? How might this change moving forward? Pensions are also a big one for people getting divorced, and sometimes forgotten. They might be less emotive than the family house but they could also be almost as valuable.
2. Saving for a family
Often something which prompts people to seek advice, the thought of children suddenly brings a new meaning to the word 'responsibility'. As well as sleep deprivation, babies often bring up all sorts of questions about life insurance, wills, savings accounts, cars, houses, school fees - this list doesn't sound cheap or easy but an adviser can help you make a plan and take it one step at a time.
What to do and where to start if a sudden lump sum is heading your way. Sounds like a nice problem to have, right? A large chunk of our mailbag is from people who anticipate receipt of a material lump sum, suddenly presenting problems which they have not faced before. With interest rates so appalling low, leaving it in the bank is just not viable. An adviser can help you to consider the right home for your money, to map to your timeframes and needs and risk profile. And also to consider tax and how you structure things.
Avoiding poor decisions, how to take your cash-free lump sum without paying more tax than you need to, whether to move that final salary scheme or not, how to think about drawdown and not run out of cash (or take too little because you're nervous). Retirement is complicated and we see people make expensive mistakes. When to take cash? How much? Drawdown or annuity? Maybe both? And how much income to take. Lifetime allowance (recently frozen so it will hit more of us).
Blimey. If we had to pick one area where good financial advice is really important it would be about pensions and retirement.
5. Leaving a legacy and inheritance tax
How to structure your affairs so you don't fall into tax traps and estate nightmares; someone to help your dependants with the financial spreadsheets in the event of your death. Even if you think you are pretty well sorted - what about your family? Could they use some help?
These are some examples of what prompt people to seek out advice. But just as often it is an ongoing sense that it's all too hard and you want someone who's got your back.