People have asked me what a Financial Planner does. It seems to me that financial planning is about providing people with choice; perhaps not in the shorter term but certainly in later years. The choice of being able to afford to go away on holiday instead of staying at home is a practical example of what financial planning is about.
Retirement is a chance to realise ambitions such as a world trip or perhaps visiting children and grandchildren in far flung corners of the country and the world.
Although a retired person might decide that they want to do none of these things it is the choice element which is important.
It is also perhaps about having some choice about when to retire rather than being forced to work to the last day.
Financial planning is not, however, about forgoing completely the pleasures of life now. Who knows what tomorrow will bring and it is beholden on all of us to have some fun along the way.
Financial planning as a process has three steps.
The first is in ensuring that potential happenings which pose a risk to us achieving financial independence are dealt with. Often removing risks requires a discussion on insurance.
We all should insure our major assets such as house, contents and car and if we are sensible, we will investigate our need for income and life insurance, among others, as well. If a solid base is not created to build wealth on then our hard work may collapse. If the worst came to pass for instance and you had a heart attack what could happen?
Without income insurance you might have to borrow (not easy from your sick bed perhaps) or use your savings (three months without an income could knock out three to four years of saving unfortunately) or sell assets (but you really don’t want to have to do that either).
So, the financial planner must first ensure that the risks to which each of us are exposed have been discussed and that, where appropriate, action is taken to remove or modify those risks.
Having established a solid platform, the financial planning process can then look at the management, accumulation and investment of cash.
The intention is the development of a wealth accumulation strategy which meets the objectives and capabilities of the client and which at the same time recognises that circumstances do change as do goals and therefore that flexibility is important.
The Financial Planners role must extend beyond saying “here’s how you go about it” however. Backup information and education must be supplied to clients over time reminding them of their goals and aspirations and supporting them through the difficult times which will occasionally arrive.
