The French author and aviator Antoine de Saint-Exupéry famously wrote that a goal without a plan is just a wish. It can pay to bear those words in mind when thinking about your future life plans – particularly when it comes to funding them. Financial planning might seem like a daunting bit of extra admin, but it basically entails making sure that some of your life goals can actually happen instead of remaining just dreams.
For professional financial planners, the process starts by understanding how their client visualises their future being mapped out – their dreams and aspirations, and when they would like to achieve them. Typical things to consider include retirement plans, and what type of retirement they would like. Are they hoping to buy a second home, or pay for a child’s education or wedding? Do they want to travel or take a second honeymoon? But other dreams and aspirations can also warrant a proper plan – for instance, if you’ve always wanted to own a piece of artwork, an expensive musical instrument or buy a classic car. The key thing is mapping out how you get there from where you are now.
“Most people have goals, but they are often vague goals, so it’s about turning those into something concrete and creating an actual vision,” says Lucy Chahil, a financial planner at the investment firm Charles Stanley. “The longer the timescale, the harder it is for clients to visualise it. If someone is in their late 40s, and their dream is to retire at 55, they can visualise that quite easily. But when you ask them: ‘What happens when they get to 60 or 65?’ it’s a lot harder to envisage, because it’s a much longer timeframe. Our role is to dig deeper and ask the probing questions that help them visualise a more meaningful goal.”
The use of “what if” scenarios can also help to crystallise people’s aspirations. Life is full of change, and people, depending on their age when they start the financial planning process, may not know exactly when they want to downsize their home or switch to part-time work because it’s not a concrete idea.
“The ‘what ifs’ show that if you did switch to part-time working in five years, these are the potential financial impacts,” says Chahil. “Another important factor is that ‘what ifs’ are based on assumptions. No one knows what’s going to happen with inflation or the markets, so being able to build those in provides additional peace of mind to clients that they’ll be OK under different scenarios.”
This is particularly pertinent in times of financial uncertainty and turmoil. “In a short space of time, we’ve had the pandemic, the war in Ukraine, soaring inflation, and now a cost of living crisis, all of which have had a knock-on effect on people’s finances,” says Chahil. The key to maintaining control of your money is to make sure you don’t have a knee-jerk reaction to these unexpected and disruptive events, but to have a long-term plan in place. “This gives you confidence and peace of mind that your finances are in a good place even in turbulent times. Instead of panic stations, you simply go back to your plan and see what needs to be tweaked.”
Chahil says most clients fall into three categories: “Those who, because of their current lifestyle, won’t have sufficient money for their retirement; those who have too much money, which can bring its own issues as they get into later life, and those who should have enough, but aren’t sure whether they will or not. Once you know which of these three categories your clients fall into, you can advise them accordingly.”
For those who perhaps won’t have enough, financial planning entails making some changes – for example, pushing back on retirement goals, or when they can reduce their working hours. Working with a financial planner gives people a real sense of the importance of personal cashflow modelling, a clear and very visual insight into their spending and saving patterns.
Those who are fortunate enough to have more wealth have their own considerations to factor in – for instance, an expectation from children that certain sums will be gifted or passed on. Other people might have philanthropic ambitions and want to give to charitable causes, but are concerned that if they give away too much too early, they won’t have enough left for themselves. By exploring various “what if” scenarios, it is possible to work out at what stage in the future they could afford to give by looking at how giving away different amounts of money would affect their future.
“Financial planning is important because it gives you knowledge and it gives you choice. It’s never too late to start, but the sooner you do it, the better your chances of reaching your goals, and the more choices you will have,” says Chahil. “There are assumptions that financial planning is only relevant to those dealing with big numbers, working out big inflows, when they retire, or jetting off on exotic holidays, but that’s not true. It’s also about much smaller numbers, and clients who just have a dream of walking their dog by the sea, and when they come home, knowing they can turn the heating on in the winter and not have to worry about it.
“With financial planning as a consistent, ongoing process, you always know where you stand. You can be confident that your finances are in control and that you can weather any storm, knowing that whatever your goals in life, you can achieve them.”
If you want to find out how Charles Stanley could help you, request a call back from an adviser.
The value of investments can fall as well as rise. Investors may get back less than invested. Charles Stanley & Co Limited is authorised and regulated by the Financial Conduct Authority.