How do you work out how much money you need to be financially secure? Several factors affect the answer to that, how long you will live, what your expenses will be, whether your costs will change at different life stages, if you need care later in life or when you intend on stopping work. Financial planning is a process that puts the right structure in place at different life stages. By working together, the client and adviser produce a personalised plan which provides the guidance sought.
With so many options to manage your own money online, why do some people still need to seek a financial planner's advice? Some people prefer the 'do it yourself' approach, and at the other end of that spectrum, some people have no interest in financial services and would quite happily pay someone to understand what they want to do and then tell them how. However, it is not just in the 'how' that financial planning delivers value for those that seek it. Research by the International Longevity Centre UK in 2019 showed that people who worked with a financial planner were £47,000 better off in retirement than those who didn't.*
Factors behind this range from being encouraged to invest to beat procrastination and gain an advantage through tax savings and allowances.
A fundamental principle behind successful financial planning is the exponential potential of compound growth. To illustrate how powerful compounding is, consider the following example:
You invest £10,000 today at an annual return of 7% per year. At this growth rate, compounding will double your money roughly every ten years. Ten years later, your initial investment is worth £20,000. In 20 years, £40,000 and in 30 years, £80,000. Going from £10,000 to £20,000 over ten years may not seem that exciting to some, making it tempting to quit and do something else with the money. However, by doing so, you miss out on the exponential returns in later years. By the same logic, delaying investing by ten years may initially look like it costs you the returns you would have made over the first ten years, but cost you the returns you would have made later on, in this case, the difference between £40,000 and £80,000**.
One of the reasons people who work with financial planners end up better off financially is they are encouraged to start early and stick to the plan through the best and worst of times. There are also tax savings and allowances available, which mean being better off in the future. In addition to the monetary factors, financial planning has a positive impact on people's well being, which comes naturally with having a greater understanding of how what you do today will affect your future financial security.
Our approach, when we work with our clients, is build the plan first. Until we understand you, we can't talk about your money or what to do with it. Once we have agreed on the plan, we can provide the financial advice needed to implement it.
If you would like to talk to us about your plans and how we can work with you, fill out the enquiry form, and we will be in touch.
The value of an investment with St. James's Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
* ILC, The value of financial advice, November 2019, based on 2014/2016 calculators. Receiving professional financial advice between 2001 and 2006 resulted in a total boost to wealth (in pensions and financial assets) of £47,706 in 2014/2016
** These figures are examples only and they are not guaranteed - they are not minimum and maximum amounts. What you get back depends on how your investment grows and the tax treatment of the investment. You may get back more or less than this.