After nearly 20 years working with private clients (and 25 years in pensions) you learn a thing or two, at least I hope you do.
There’s a conundrum that persists in financial planning. It goes something like this:
“Is it better to adapt what you do and how you do it to suit the prospective client so they “sign up”,
or
to have absolute faith in what you do and work only with those that understand and appreciate it?”
For me the answer is unequivocally the latter.
The former seems dishonest and disingenuous, especially when working with private clients; there’s an element of deceit to it. We’re not selling tiles or teeth after all, what we do isn’t meant to be for everyone.
Let me give you an example.
We work on a “Goal, plan, invest” basis. First of all we need to establish someone’s important short- and long-term planning goals. For example (and very simplified), they need £50,000 to help the kids in five years and to stop work in ten years and have an income of £4,000 pm net for life.
Having established that, we can write a plan together that will help achieve these goals. That covers the suitability of what they have now, how likely they are to achieve their goals and what to do to make their desired outcome more likely.
Once the plan is agreed, the investment strategy – the motor for the plan – comes into play. The investment strategy is simply how the available money should be split between cash, bonds and equities. It is the servant of the plan, not the other way around.
My view is that any client we work with needs to understand and accept this. Otherwise what’s the point of working together?
But, suppose we meet a prospective client who is completely disinterested in the first two parts. All they want is an investment strategy that will produce 8% pa with no reference to goals.
We could easily try to facilitate that. But should we? What will happen when 8% isn’t achieved one year?
Most likely they will be disappointed. That could lead to more bad decisions and disappointment.
So, should we bend to their wishes, ignore what we know works and avoids disappointment? Just earn a quick, easy and, ultimately, unhappy and transitory buck? Knowing that we have enabled and facilitated the sort of destructive behaviour we’re trying to avoid?
Or should we patiently explain the whys and wherefores of our approach, hope they can see that for themselves and, if not, politely decline to work with them?
It surely has to be the latter, doesn’t it? Isn’t it essential that you believe what we believe?
We’re not politicians after all, which is exactly why we can’t, shouldn’t and won’t be all things to all (wo)men.
future proofing your finances
advice@townclosefp.co.uk
Town Close are expert financial planners. Our goal is the same as yours – to help you do the things that are important to you in the time you have remaining.