Managing director of Glasgow-based Forty Two Wealth Management and vice president of the IFP, Alan Dick, here provides 12 essential retirement questions advisers should ask their clients.
Dick has provided the questions in aid of Financial Planning Week (FPW), an event organised by the Institute of Financial Planning (IFP) that runs between the 26 November and 2 December. FPW aims to raise the profile of financial planning amongst the general population.
Here he discusses the benefits of pensions advice, and the 12 questions an adviser should ask to get the best deal for their client.
He said: "As it's Financial Planning Week this week, it's a great opportunity for us as professional advisers to consider how we can best help our clients to plan for important goals in their lives such as retirement.
12 essential questions you should be asking
People often moan about pensions being poor investments and say things like, "the returns have been dreadful, I would have been better off investing in an ISA, buying property or even holding cash".
But, in my opinion, this line of thinking misses the point, the real issue and the first big question is how much do you need to save?
Unsurprisingly, most clients don't know.
Traditional financial advice focuses on the sale of a financial product and doesn't even begin to attempt to understand the really important issues such as how much is needed.
Yes, sometimes a dream lifestyle is used as means of motivating clients to buy a product but this is part of the problem - advisers are selling dreams when they should be managing expectations.
The second question is what investment assets will be held inside the wrapper?
These two big questions can only be answered after clients have identified what they want their retirement to look like - to get this answer an adviser will need to ask the following:
• When will it happen?
• Will it happen as a single major life change or a gradual transition?
• Will they stop working completely or change their working life - perhaps starting a new job or a business fulfilling a lifelong passion?
• Where will they live?
• What will they do?
• Who will they do it with?
• How much will it cost?
• How much risk are they prepared to take to achieve their goals?
• How much risk do they need to take to have a reasonable chance of achieving sufficient growth to achieve their goals?
• How much risk can they afford to take? - often a very different answer!
Once a client can answer these questions clearly, and only then, we can begin discussing whether a pension is an appropriate tax wrapper and how much is needed.
The problem is, most people have never considered these questions. Even those that have, often struggle to articulate the answers clearly to themselves let alone to a Financial Planner who is going to help them create a suitable strategy to provide the peace of mind they need.
The issue isn't what are the product alternatives to pensions but rather what service do clients really need from their advisers?
Once clients experience a genuine financial planning service they stop thinking in terms of financial products and start thinking about achieving and maintaining their desired standard of living.
Clearly pensions are one of many products which could be used but it is unlikely that a pension will be the solution in isolation.
Clients may also chose to use bank deposits, ISAs, share portfolios, collective investments (Unit Trusts/OEICS/ETFs/Investment Trusts), investment bonds (onshore or offshore), property, equity release, etc.
The options are almost limitless once the financial plan is in place but remember a financial plan is for life not just for Financial Planning Week."
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