 E-Newsletter
Subscribe to our newsletter and get the latest updates on PIAS and our products.
PIAS FINANCIAL PLANNING
An Introduction to Lifestyle Financial Planning
by Ian W. Porteous
When was the last time you asked your financial adviser to join you at a family function? If the answer is "never", you are probably not alone.
Weddings, birthdays and even the poolside BBQ are normally reserved for friends with whom you have some sort of relationship or bond and can talk comfortably on a range of subjects. With recent years of poor stock market performance still a depressing reminder that many investments can go backwards, and the talk of pensions or insurance being a guaranteed conversation stopper at the best of times, the person who tells you where to put your money might not be someone you'd normally socialise with.
Moreover, those dismal returns, which may have been the recommendation of your adviser, might make them the last person you want to show off to your friends.
But all that might be changing.
As much of the industry continues to provide people with a financial solution based purely on an initial briefing session, which generally tends to focus on whether you have enough cash in the bank to throw at the latest hot product, there are those whose aim is to try and learn more about the client and their family.
Looking beyond the legal requirements of "know your client", advisers are increasingly moving toward the industry trend of lifestyle financial planning. That is, helping clients organise their financial goals around the sort of lifestyle they want.
Rather than pulling out a plan that's simply focused on cleaning out your current account, advisers are now being encouraged to put the client's face on their money. To do this they are at last learning to communicate with their clients.
Lifestyle financial planning is so much the buzz that it is regularly becoming the focus at many financial industry conventions. This change of direction is essentially being driven by a public who increasingly demand a technically appropriate financial solution that doesn't compromise their lifestyle. A more holistic approach focused on balancing your life with your business and home life and your health.
To do it properly, the adviser needs to form a closer relationship with the client, with better communication and a better understanding of their wants and needs. Just as negative returns for many investors may prompt them to wonder why they need an adviser at all, advisers are thinking of new ways to keep their clients engaged.
Give a client a plan based only around the "product of the month" or the only product you have, and you probably won't keep them as a client for very long. There is no such thing as a "one size fits all" investment model, it's more important to get inside the life of the individual, form a strong relationship in order to ensure you understand their financial and lifestyle goals and then present a realistic strategy on how to get there.
Let's also not forget that in today's world, especially those of us working overseas, these plans can change in an instant. Market movements, retrenchment, acts of war or terrorism; the list of events that can effect your long term plans or bring about a sudden change in residence is endless. As an expatriate myself for over 25 years with clients who now live in a number of different countries, yet still knowing as much about them and their families as I do my own, the ongoing relationship, the weddings, the anniversaries and christenings, which have all been common events over the years, continue to be shared with the same enthusiasm as if I were indeed a member of the family, it can be that close.
Lifestyle planning involves a trade-off between all the things we want to do and achieve. Regrettably, most of us can't do all the things we want to do. For example, take a client whose life goal is simply to retire offshore, play some regular golf and travel overseas to visit family members each year. Knowing that's what they want, an adviser can put together a plan to help them achieve these goals - this may mean they have to save more or invest more aggressively but at least their decisions will be based on knowing the reasons why. Lifestyle financial planning takes into account how important each of these goals are to the client, creating a discussion around what they are prepared to do today in order to achieve them tomorrow.
Additionally with the context of lifestyle you have got to keep it up to date, otherwise the fee paid for the initial plan is wasted. You buy a car but you don't get value out of it unless you maintain it.
Where an initial financial plan may be individually priced depending on its complexity, any ongoing financial check-up should therefore be an integral part of the ongoing fees involved in managing your investments, not based on what you're going to buy next.
A refreshing change from the traditional advice model which tends to be more focused on volume sales and instant gratification for the adviser with little or no regard for the future wellbeing of the client.
Lifestyle financial planning is essentially about communication, a conversation built around your goals and what you aspire to, followed up with the subsequent tailoring of a financial plan which is individual to you, the client.
What this means is that on top of the questions you might get when you go to an adviser for the first time - such as your personal details and how much you want to live off in retirement - a good lifestyle financial planner will ask a lot more about your interests and values and what's important in terms of your family, work and health, not only today but into the future.
When it comes to mapping out somebody's financial future, best advice can only come from an understanding of the client's lifestyle and personal goals, with the real value coming from the client understanding and taking ownership over the lifestyle they aspire to and the balance needed today in order to achieve their goals for the long term. The financial aspects should simply be the enabler to this better lifestyle. If you don't understand what is important to you in terms of your health and family, etc, then you may end up very wealthy but also very unhappy.
|
