FOCUSED FINANCIAL PLANNING
Financial Planning & Wealth Management ........................ "Creating Wealth, Protecting Lifestyles"
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Frequently asked Questions.

 

 

Focused Financial Planning emphasise that the financial advice we give is likely to be different from the advice that you would receive from a commission driven financial adviser. The following Questions and Answers aim to clarify the advantage that our approach will give you.

Financial Planning
 
Isn't Financial Planning what all advisers offer?
 
Probably what they offer, but rarely what they deliver.
 
And the difference is..?
 
Most "financial planners" are still the old fashioned IFA, dependent on selling products for commission to make a
living. We are interested in your values - what standard of
living do you want to be able to maintain throughout the
rest of your life? We then calculate what needs to be done in order to get you from where you are now to where you 
want to be. Look at the investment products you have now - 
do you understand how they fit together to meet your future needs?
 
That's easy, I need £500,000 at age 60 with a 5%
return to generate an income of £25,000 each
year for the rest of my life don't I ?
 
No, you need a lot more than that. If retail price inflation
runs at 4% a year and your income needs to increase
accordingly, your capital will be all gone when you are aged
83, You need £815,000 at age 60 if the income is to last
until you are aged 100.
 
So how do I plan to have enough?
 
We take account of all potential sources of capital and
income. Sale proceeds from a business, potential
inheritance, downsize property, take equity release, sell
your holiday home, invest differently, reduce expenditure -
you might find that running only one car in retirement is
adequate for example. Using agreed assumptions, we
draw up a lifetime cash flow statement showing what will
happen given your current situation and then another
showing the revised position if certain action is taken.
 
Can't I do that?
 
Possibly if you have the time, patience and know-how. We
use dedicated financial planning software to draw up the
plans which can cover disaster situations as well as
retirement. There are approximately 60,000 financial advisers but only a couple of hundred are prepared to invest
in the software that we use. 
 
Disaster situations?
 
What would need to be done to ensure that you or the
family were able to maintain their standard of living in the
event of premature death or long term illness.
 
Can you summarise your service?
 
The focus is on you and what you value in life and would
like to be able to afford to do for the rest of your life. We
show you what needs to be done to fund that lifestyle.
Our aim is to never hear a client say "We used to, but
we can't afford it nowadays".
We offer a Service Standard Guarantee for your peace of
mind
 
But what are you selling?
 
Financial security , not investment products. If we feel that
an investment product needs to be purchased, any
commission arising belongs to you and will be either paid
over to you, used to reduce the product charges, or used to offset against fees.
  
Investment Advice
 
You say you are different - just how different how you?
 
Most investment advisers are fund pickers. They research the market and recommend those funds they hope will continue to perform well. The problem with that approach is that the research can only be on past performance and as we all know, past performance is no guide to future performance. We believe that portfolios should be diversified and reflect your risk profile. Rather than pick fund managers and trust to luck, we concentrate on making sure that your portfolio is diversified across the relevant sectors in the right proportions given your objectives, timescale and attitude to risk . For instance, if we think that you should have 25% of your portfolio in UK equities, your portfolio is likely to include a low cost UK All-Share index tracker fund rather than a managed fund in that sector in the hope that it will out-perform the index.
 
But the idea of out-performance attracts me.
 
It is only human nature to want that. But fund managers do not out-perform year on year on year. They are human beings and will make errors of judgement. When they do, their fund and your investment portfolio performance suffers.
 
My adviser only recommends funds with good track records over 3, 5 and 10 years.
 
Yes but good performance just over the last six months can
improve the performance figures over longer periods if you are
looking at cumulative performance. You need to look at discrete performance (year by year) to get a true picture.
 
Some advisers will only recommend AAA rated funds and fund managers - isn't that good practice?
 
To a point. However ratings are both given and taken away. There are many funds and fund managers who have had AAA ratings only to lose them. Importantly, the ratings are not taken away immediately if there is a dip in performance as this is to be expected from time to time. It is only when it is clear that there are real issues with the fund management and discipline that the rating are taken away and by that time there is likely to have been many months of under-performance and you will have suffered in the meantime.
 
Isn't my adviser reducing risk by trying to seek out a good manager?
 
No, quite the opposite. If you invest in a tracker fund, you should secure the same return as the index after allowing for charges.
By moving away from the index you face the possibility of under-performing the index just as much as out-performing
the index. The fund manager may get it wrong and therefore you are adding risk and adding costs. You will generally see more funds under-performing an index than out-performing it. 
 
You mention charges, please can you clarify the position.
 
Most managed funds have an initial 5% charge and an annual management charge of 1.50% or 1.75%. Index tracker or passive funds may have no initial charge and annual management charges as low as 0.25%. The lower charges have a big impact on eventual values. The longer the investment is held, the greater the advantage.
 
Doesn't your approach mean that I am unlikely to ever get the highest possible return?
 
Probably, but what you should get is a good return from low-cost asset based portfolios, taking into account your objectives and attitude to risk. 
 
What funds do you recommend?

We are independent financial advisers and can create your portfolio from the whole spectrum of funds available, including those from Dimensional Fund Advisers. We are one of a limited number of fee-based specialist investment adviser firms that Dimensional will accept business from. More information can be found at www.dfauk.com and we recommend that you take a look at their site, not only to look at the fund choice but to get an idea of the investment philosophy that you can benefit from.