The Hidden Value of Great Wealth Planning
Almost everyone worries about money, what the future may hold, and the decisions and choices that they will face along the way. Yet few realise that wealth planning is the key to sorting it all out. Everybody needs it, but only a few have unlocked its true value.
For those who have, the equation between the value that they receive from their wealth manager and the fees that they pay needs to make sense. Yet, because the benefits of good advice are often received in the far-off future, it is sometimes easy to miss, or dismiss, the value received along the way. Market noise, emotions and periods of what may seem like inactivity on a wealth manager’s behalf, can also impact on the perception of value. It is often easy to appreciate the value received in the first year, and easy to forget or appreciate the value on an ongoing basis. The wealth planning relationship can be broken down into three key phases of value.
Value Phase 1: Sorting out the mess and the building plan
New clients often arrive with a proverbial suitcase of bits and pieces collected over the years, such as a number of pension plans, offshore tax inefficient investments, large line items of single stock, life insurance and a stock broker or IFA managed portfolio. This collection of ‘stuff’ sometimes has little structure and does not always provide comfort that the future will be bright. That’s a stressful place to be.
The first and most vital step is to help clients set out their vision for the future, both in terms of lifestyle goals and the money needed to fund them. Next comes the analytical work, which may involve using cash flow modelling tools to help empower clients to make sensible strategic choices. The resulting ‘Rational Wealth Plan’ becomes a joint effort between client and wealth manager. Once sorted and implemented, the client is then back in control of their future and their finances. The value is easy to see.
Value Phase 2: Plan progress and progressing the plan
Wealth Planning is not a ‘set-and-forget’ process; far from it, in fact. Regular review meetings help to provide clients with an insight into how things are going relative to the plan. What is more important is the future and how the plan needs to progress from this point forward. Some issues and consequent decisions faced may relate to events in the client’s life, or may be more technical or market issues that sit in the wealth manager’s bailiwick. Clients have better things to be doing with their time than trying to understand and tackle these issues alone!
Some years may be quite uneventful, while others are momentous. In the former, not much may appear to happen, but that does not diminish the value of the wealth manager, who is, behind the scenes, constantly on the lookout for any issue that may threaten the successful outcome of the plan, or ways in which said plan can be refined. At times of crisis, understanding the issues faced, finding a solution that makes sense, facilitating decisions that need to be made and having the fortitude to execute under pressure is where great wealth managers come into their own.
Value phase 3: Long life, death and immortality!
There are also some more subtle areas of the value of a long-term relationship with a trusted wealth manager. For many people, living longer is a two-edged sword. On the upside, we can all now expect to live materially longer than our grandparents’ generation. On the downside, we also know that with longevity comes attendant health and financial challenges. For example, long-term health care costs are rising rapidly and simply knowing that they can be met is a great comfort to many. A wealth manager who knows the family and their financial circumstances is well-placed to provide advice, support and to facilitate the financial consequences of the new change in circumstance when it is needed.
Many clients, often couples, one of whom takes more interest in finances than the other, worry about what will happen to their partner upon their death. Having a trusted wealth manager (and an up-to-date plan), allows them to be more confident that, in the event of death, their partner will be well cared for financially and that their affairs are in order. Probate too is a far easier process when everything is organised.
Most people would like to feel that they will, in some way, leave behind a lasting legacy. For some, that can mean spending time and money supporting their philanthropic works and for others it may mean passing on wealth from one generation to the next. Again, wealth managers can play an important role in helping clients to make decisions surrounding such issues.
It is easy to forget when you meet with your wealth manager for your Progress Meetings that the scope and value of the relationship is far deeper and more important than worrying about the 12-month market noise that has resulted in your portfolio going up and down, or the fact that neither your portfolio nor the plan has changed much. Meeting your goals, feeling confident in the future and having the time to enjoy the opportunities that your money provides you, your family and your community are what really matter. Delivering ‘peace of mind’ may sound a bit trite, but that is the goal, consequence and value of great wealth planning.