This is what I want to do, now how do I do it!

I was talking with an old friend recently at his 60th birthday party who, for the sake of this blog I am going to call Peter. Peter has done rather well for himself and our conversation drifted into the area of finance. He was wondering when he could stop working and devote more time to his hobby of racing vintage sports cars. During our conversation he was bemoaning the fact, that although he had considerable wealth with a well-known private bank he wasn’t getting much guidance beyond regular valuations and lunch with his relationship manager.

I asked him what he meant, he said that his bank was always efficient and would respond to requests quickly but he felt something was missing, there were no ideas, other than to invest more money but what was that for other than to build up more funds.

It had been a long night, by this time and things turned a little philosophical, 60th Birthdays can have this effect on people. “It feels”, he said, “as if life is a journey, I know how I got here but not really the purpose of being here or where I am trying to get to other than to one day stop.

The next day I was thinking about Peter and the service he gets from his bank; his situation was a little like the balloonist who becomes lost. Floating close to the ground he sees a man walking his dog and shouts to him, asking if he can tell him where he is. The man replies “Certainly, you are standing in a wicker basket, 12 feet above the ground below an enormous bag of hot air. The balloonist considers this for a moment and replies “You must be a Management Consultant” to which the man replies “By heavens, I am, how did you know? The balloonist replied, “Well the information you have given me is detailed and accurate but actually of no use whatsoever”.

As a financial planner I try not to advise close friends, other than perhaps pointing them in the right direction, as I am not sure that business and friendship is a good mix although strangely, I do have clients who have become friends which seems a different thing altogether. On this occasion however, I thought I might be able to help my friend.

We talk about financial planning and so often this seems to end up as advising on financial products but really financial planning is about life planning. You can’t financially plan if you don’t first establish a client’s aims. For a lot of clients this may be quite a process and the first time they have truly thought through what they are trying to achieve in life, sometimes it throws up very deep consideration of life style and relationships which, I have to admit can be a little awkward.

As a simplified example let’s consider Peter’s case. His aim might be to reduce his working time to a 3-day week to allow more time to spend preparing and racing his cars. He may wish to do this for the next five years before retiring fully, downsizing and moving to the coast.

Knowing this, a Financial Planner can help Peter to establish the objectives he needs to reach to be able to achieve his aims and understand how his investments, pensions and cash savings can be used effectively to achieve those objectives. Cash Flow Modelling can be used to sense check ideas and help work out the most tax efficient way of generating income. What it brings, is a sense of purpose and defined objectives to a person’s finances which is sometimes just what is needed.

David Griffiths MLIBF Dip FA


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