It is a persistent question that circles around in my head, what VALUE do we add to our clients as a profession and of course, as PWH Wealth Group.
In an article published by M&G Investments, the following results from a Vanguard study showed:
“…a financial adviser could add a potential total of “about 3%” p.a. in terms of net returns relative to the average client experience.”
What is interesting to note is that half of this – or 1.5% – was derived solely from behavioural coaching, or guiding their clients in adhering to their personal financial plan. The next largest factor was asset allocation decisions between taxable and tax-advantaged accounts, at between 0 - 0.75% p.a. Importantly, the Vanguard study found that value from behavioural coaching isn’t added uniformly over time, but typically in large “chunks” every few years, as market cycles moved from downturns to upturns.”
Read the full article here.
Unbiased.co.uk published an article citing: “Brits who took professional financial advice between 2001 and 2006 enjoyed an average increase in their assets of nearly £48,000 after 10 years, compared to those who took no advice. The benefits of advice were particularly significant for those with less disposable income, and also for people who took advice more than once. The combined benefits of advice over the 10-year period work out to approximately 2,400 per cent greater than the initial cost of the advice.”
Read the full article here:
What is a financial plan?
In short, it is a forward looking cash flow analysis taking your moments of joy and dreams in money terms and plugging them into a cash flow. This ensures that you are save enough to be able to pay for them in the future. Further to this, it is aligned to your values (the most important aspects of you) to provide you with boosts of dopamine the ‘happy hormone’ as you stumble through this thing called life.
When does one need a financial plan?
The short answer is ANY TIME. From the time you start earning money (and it could be pocket money) until you pass your hard-earned money onto the next generation. It is also never too late to start having a financial plan.
Who is a financial plan for?
Why does EVERYONE not have a financial plan?
In our experience there are many reasons for this, including: ”I am good with my money”, “I am fine”, “the cost is too high to consult a Financial Planner”, “my friends give me advice on what I should be doing”, “I am happy to just wing it from month to month” and FEAR. This fear may stem from the feeling of having one’s finances exposed (SHAME) and judged for how I spend my money/ ‘waste’ my money.
WHERE is the value?
As mentioned above, the value comes from behavioral coaching and asset allocation, in addition it comes from correct tax structuring, being invested in the right products, having a set goal (which could be flexible as priorities change over time) and of course having a cheerleader to keep you on track to move towards the dopamine moments throughout your life.
I am a person who enjoys having the things in my life color coordinated with everything packed away in boxes neat and tidy. That is how our clients’ financial plans should be. A refresher on our process and value add:
Understanding our clients through risk profile assessments and personality assessments.
Understanding our client’s dopamine moments and values through a purposeful life plan.
Where do our clients spend their money? (wants vs needs on a budget)
What have they acquired and who do they owe money to?
What does the cash flow look like?
We will then put all of this information into a neat box, analyise it and then ask question, what is the most cost-effective way to achieve the dreams of the client?
And the plan is born.
The journey does not stop there; the hard part now begins, changing past behaviors, overcoming fear, learning and accepting that ‘living your best life’ is indeed possible and in your control.
Indeed, our asset allocation process and the conversations around time in the market add to the pot, and for me the real value lies in the analysis of the numbers (PWH) and our clients having the ability to buy into their big dreams and living them with the support of PWH.
Between myself, Ron and Evelyn we have a combined estimated 80 years of financial planning experience AND people experience.