One of the challenges we face as Fee Based Planners and
Wealth Managers is how do doctors and dentists get to know
about Graeme and Ray and the job we do?
After all, we know (and our existing clients tell us), that
we are providing our clients with exactly the kind of
service they want, and they love the way we work for them
and not the product provider.
But of course how would a dentist in Yorkshire or a doctor
in Surrey get to know this? One method that has seen
success is that we are prominent in the major search
engines (especially google). So, for example, if you search
for 'financial advice for dentists/doctors' (without
quotes) you should see us up there towards the top.
And this is where the story starts. One of the calls
received in December was from a dentist in the Durham area.
I referred to this client in an earlier newsletter, but the
essence was this.
An Independent Financial Adviser, well known as someone who
targets the dental market, had visited the caller - let's
call him John - and had asked him a few questions, and John
had told him what he thought were his priorities, and the
adviser had made some notes.
Apparently, after about an hour, the adviser said "OK. What
I recommend is that you invest £2,500 per month into
a personal pension plan". John was already paying almost
£500 per month into a couple of personal pension
plans on top of his considerable NHS Pension, and so he
asked if that meant it would be £2,000 in addition to
these.
You may have guessed the answer...
"Oh no, it will be a new plan for £2,500 and we will
stop the others, and I have the paperwork here". John
looked at his wife (let's call her Jan), and said he would
think about it. So that's how it was left when I received
John's call.
He expressed his concerns at the indecent haste in coming
to a big decision like this, and when he had turned to the
back page of his pension plan quotation, he was staggered
to see that this adviser would be PAID £19.500, YES
£19,500 for this sale! John was not comfortable with
this at all, and had the distinct impression that the
adviser was more interested in the sale than him.
We suggested that, as John had read about what we do on our
website, he could come in to our office with his wife, and
I would demonstrate how we could help them. Like all our
new clients, they were given some homework to do before our
meeting, and they emailed me these before we met.
This information includes "what do you need to achieve in
life and when" and "what progress have you made so far",
based on the value of the practice/investments/Income etc.
After all, what could be more important than that?
John had very clear goals, and when we met it became
increasingly obvious to him how different we worked
(compared with the other adviser), and to his delight he
felt that he had found someone he could work with.
Keeping it simple here - John and his wife, who is 9 years
older, wanted to buy a cottage in the North West where they
loved to holiday, and for John to slow down at age 50, as
Jan would be retiring.
The question of course is "do we have enough wealth to be
able to do this, or will we run out of money before we
die?". Time and time again, the vital aspect of any
planning had been missing from John and Jan's life -
MEASUREMENT.
Having demonstrated the cash flow forecasts we use to help
clients with this all important context, John and Jan now
understood why we recommend this approach. If you don't
know where you are, and you don't know where you are going,
how do you know when you get there?
So we all shook hands, and I told them that we would meet
again at their Strategy Meeting after two or three months.
Our strategy meeting was a week ago, and this was the
result after studying their cash flow forecasts, and
devising a strategy:
- Pension - stop all pension planning apart from the NHS.
This saves £500 per month gross.
- Offset Mortgage - create an extra borrowing facility of
£200,000 to buy a cottage now as a cash buyer.
Increase payments to ensure all debt paid off by age 50.
- Look to raise more finance from the practice - accountant
to comment on this, as a lower rate here than residential
debt after tax relief. Potential savings of £25,000
over 15 years.
- Equity ISAs - use the spare income to invest monthly for
the long term to create an accessible tax efficient
'retirement pot'.
- Wills - checked and various comments made by specialist
solicitor.
- Lasting Power of Attorney - solicitor to action to ensure
if one person incapacitated the other could take over their
affairs.
- Life cover - overall level checked as ok, but for the
same cost they could have individual cover instead of joint
cover.
- Fill in NHS death in service form DB1 - this to earmark
Jan as the Beneficiary.
- Income Protection - we changed one plan John had that was
not occupation specific to a company that did protect him
as a dentist.
- Inheritance Tax - existing pension fund had spouse as
beneficiary. As we knew that Jan would not need this money,
the children were nominated as the beneficiaries. Potential
IHT saving here circa £25,000.
- Existing Pension Fund - this was transferred to a risk
assessed portfolio, as it was way out of line with their
risk tolerance levels.
- Annual Review - this to ensure they are kept on track,
and to take into account any changes in their life.
The result? Very happy clients who now know exactly where
they are, and exactly where they are going. The spare
income they have is now concentrated in exactly the right
areas.
The total cost, including investment implementation came to
£4,750. This compared to the salesman's £19,500
for one pension plan, no strategy, no measurement, and
ignored or more likely missed the other issues that needed
dealing with.
Chalk and cheese!
Key Considerations:Be aware that the vast majority of
advisers are, in our experience, paid only when they advise
you to take out a policy. Since this is the case, the old
saying of 'if you only have a hammer, everything looks like
a nail' comes to mind.
They also do a totally different job. It's like comparing a
Senior House Officer to a Senior Surgeon.
Action Point
If you have an existing adviser, or are looking for one you
can trust; be very clear about what type of person you want
to deal with.
Would you want to use a dentist who does not bother to say
"open wide please" but proceeds to recommend treatment?
If you want to have a diagnosis before prescription, find a
Fee Based Planner who works for you, and you will be
assured that they will do a holistic planning job to
optimise your financial affairs.
One tip - the next time you speak to your/an adviser, ask
what type of cash flow forecast system they use. If there
is a long pause - you will know!
----------------------------------------------------
Ray Prince is an Independent Financial Planner with
Rutherford Wilkinson plc, and helps UK Resident Doctors and
Dentists get the best deals on mortgages, protection and
investments, as well as helping them achieve their
financial objectives. Just visit
http://www.medicaldentalfs.com to get your free retirement
planning guide. Rutherford Wilkinson plc is authorised and
regulated by the Financial Services Authority.
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