Now more than ever, it is really important to keep in mind our life goals and financial objectives. Many advisers focus on advice linked to financial products without considering the required steps to achieving objectives, milestones and financial goals. We all need long-term aims in order to start a financial plan to achieve them. So what does the end result look like?
The foundations to any good financial plan are identifying the long-term financial goals and taking an in-depth look into current cash flow. An adviser works with a client to understand exactly where they are now, where they want to get to and what steps need to be taken to achieve this. A cash flow model is a detailed picture of a client’s assets, investments, liabilities, income and expenditure that is projected forward, year by year, using assumed rates of growth, income, inflation, wage rises and interest rates, with the ability to vary these assumptions as required and review them annually.
At Mattioli Woods, our core client base is often either current or retired business owners, senior professionals, and entrepreneurs. Naturally, with the territory comes a detailed understanding of a business’s overall plan, including assets, current and forecasted turnover, profit, tax liabilities and a whole host of other details. However, when the same individual comes to put a very similar plan in place for their personal finances, the different elements are often compartmentalised, with the various pots rarely viewed under one cohesive financial strategy. As with any strategic planning exercise, the output is only as good as the information provided, so a two-pronged approach between an adviser and a client’s accountant is essential in delivering this, especially for business owners.
There is no denying that for some this can be an uncomfortable exercise at first and is a planning exercise in itself! It perhaps does not get as much focus in the industry as tax planning or portfolio management. However, to have true peace of mind that your finances are on track and you are doing the right thing, it is something that needs to be tackled. If there is a deficit between the current trajectory and the end goal, it is always better to confront this as soon as possible.
On the other side of the coin, most people receive a real boost in terms of confidence in their financial security. Understanding how much capital is needed to be able to maintain their lifestyle and enjoy retirement can often mean they have the confidence to perhaps tick off some of those ‘bucket list items’ or provide financial assistance to their loved ones sooner than they otherwise would feel comfortable in doing so.
Achieving this key exercise, as well as reviewing and updating this on a regular basis, is at the core of all planning and an exercise all individuals who are serious about achieving their long-term financial goals should be completing.
By Richard Watson
Mattioli Woods will be exhibiting at Accountex Summit Manchester the 12 October 2022 at Manchester Central at stand B13. You can register for a free ticket here.