Matt Timmins: Advisers must go back to basics
You may have heard about the recent successes of Huddersfield Town FC, which is the only promoted club to have not lost a Premiership match so far this season.
As a result of their recent promotion, the John Smith’s Stadium, at which our central office is based, is undergoing a significant amount of refurbishment.
I do not just mention this in a shameless attempt to flatter the Terriers in the hopes of receiving some decent seats when they face my team, Manchester United, at the end of October (although I would not say no). No, instead, the renovations made me think about the importance of solid foundations.
Both the stadium and the club have been able to develop to these new levels of success because of the strong foundations – figurative and literal – already in place at their core.
This in turn made me think about the fundamentals of financial planning and whether we as an industry spend too much time focused on the Premier League elements of clients’ plans without tackling the grassroots areas first.
Of course, there are many reasons for such a shift away from the basics: product innovation, news stories and the educational events to which we are invited shine a spotlight on the high-profile worlds of investment management and how to deal with sizable pension pots.
In addition, RDR has meant the majority of advisers’ client banks now feature a large number of high net worth clients, whom it is easy to assume have the basic features of their financial plan already in place.
Advisers no longer service the number of clients they used to across the traditional milestones of buying their first home, setting up savings accounts for their children or putting protection provisions in place.
Changes to the ways in which advisers can charge for services means having a lifelong relationship of this kind is not viable for many clients until they already own property and assets, have decent savings and pension pots and a significant amount of funds either already under management or ready to invest.
However, do not assume that all the basics are in place, even if you see a client whose financial circumstances suggest they are likely to have a fairly sophisticated plan.
For instance, I am often shocked by the number of consumers who have bought a property without any planning about what would happen to it if they died. It is not the most pleasant thing to consider but a properly planned and constructed will should be a part of every client’s financial portfolio.
There are many aspects to consider when reviewing the estate planning needs of a client who owns property, including any outstanding mortgage. Whoever is set to inherit the property would be responsible for making the repayments and paying any debts in the deceased’s estate.
For couples who own the house jointly, the responsibility falls to the surviving partner solely. However, the situation can become more complicated for unmarried couples who own the property as “tenants in common”.
In these circumstances, the deceased would have needed to name the surviving spouse in their will. Without a will in place, 50 per cent of the property would follow the law of intestacy and the surviving partner may end up sharing ownership of their house with someone they would not have chosen in a million years.
Issues like this could lead to problems with selling the property and falling behind on repayments of debts not of their making – circumstances that could cause long-term damage to your client’s financial situation.
Advisers should also encourage clients to have an agreed lasting power of attorney (or continuing power of attorney, for Scottish clients) in place.
LPA/CPAs are all too often viewed as important for older clients only but, sadly, mental impairment can strike at any point, either through illness or as the result of injuries. Putting an LPA/CPA in place is a reasonably straightforward process but a vital one. Do not let clients put it off.
The likes of wills and most protection products are not always a comfortable thing to talk about to clients and can be difficult to frame attractively. Indeed, they are the one area of advice in which you hope clients will never see a pay-out on their monthly investment.
That said, there is little point in working with a client to produce a Premier League set of funds under management if you do not put the basic foundations in place to protect them from relegation.
Matt Timmins is joint chief executive of The SimplyBiz Group