There’s an odd coincidence I’ve noticed in many years of seeing clients for their annual reviews: It’s remarkable just how many people seem to be heading to the dentist straight after.
It’s as if they consider a check-up from me to be as potentially uncomfortable as having their teeth prodded and poked with. I always try not to show I’m offended…
There are, of course, several reasons why a review can be seen as a less-than-desirable thing to do. From time constraints to emotional avoidance.
But many clients assume they don’t have anything worth mentioning: they find it difficult to recognise the significance of a lot of changes in their lives as translating into impacting their financial plan. And yet it’s this that underlines part of the real value of the review.
So to bring these to life, I’ve taken a typical week to show the varying reasons why reviews are so important. I shared this snapshot with my clients recently to help them to recognise examples that might be true of them too. I’ve noticed it’s made booking their meetings in a lot easier.
You might like to use this as a springboard for your own examples too.
Monday
At the start of the week, I saw Sarah, who recently made the final payment on her mortgage, and was excited about what it would mean for her. We’d already built this event into her financial plan, but now that it was here, it was time to discuss the details of what she could do next.
Could she use the additional capital every month to increase her pension payments? Or should she set aside some money in a separate investment account? These were big ideas for Sarah to contemplate, but we were able to give her space and time to consider all her options.
Tuesday
Brian, on the other hand, is just about to retire. This is another event that all our clients are working towards. The most important aspect here, from a financial planning perspective, is making that transition from saving money to ensuring you have regular and sustainable income.
Much of Brian’s savings are tied up in workplace pensions, so restructuring for this transition hasn’t been possible so far. This year’s annual review discussed how we put this transition into place, enabling him to draw down as and when he needs it in the years ahead.
Wednesday
Diane has a new partner and they’re planning to move in together soon. Among other considerations, this significant life event will involve selling one or both of their own homes. Diane’s divorce has recently gone through, and her ex-husband will be due to receive some of the capital when they sell their home.
So her review looked closely at the next steps. Diane and her new partner will be looking at joint long-term planning and with only one household to run, there will be increased income. At the same time, Diane’s partner is self-employed, so there are additional issues to look at there.
Thursday
The government scrapping the Lifetime Allowance (LTA) on pension contributions is good news for Simon, a client with us for the last 12 years. The previous limit of how much you can pay in before being liable for tax (set at just over £1 million) meant he’d stopped paying in. The changes from this April mean he can restart contributions. With two years left until retirement, that could make a significant difference to his financial pension pot.
In his annual review, we discussed how renewing payments will impact his monthly income profile and cashflow projections. A potentially larger final pot opens up new possibilities, for example he could retire earlier, or consider new ventures when he stops working.
Friday
Even if nothing’s changed, there’s still value in the annual review. Even now, when the economy appears so gloomy, we can reassure clients that, in the long term at least, things remain on track.
This was the case for Jane. Given negative headlines, recession warnings and rising interest rates over the last year, she was surprised when we showed her that her portfolio had performed way better than expected. As for her plan, we can keep things as they are – but will check in at the next review in a year’s time.
Not like pulling teeth
I always make it clear often, we don’t need to make any changes. Other times – even when we’re considering major life events – the likely result is small adjustments, rather than wholesale upheaval.
I also add that although the point of an annual review is to make sure nothing slips through the cracks. By contrast, if a client only came to see a financial adviser once in a while for an ad-hoc service, it’s very likely they’d put off talking about something until it was too late: just like routine dental check-ups prevent the decay from turning into a root canal, regular financial reviews are about maintenance rather than major surgery.