Find a financial coach who is on the ball
Successful athletes have often experienced the influence of great coaches. The sort who light a fire under a team, who instil a work ethic, who make you understand the connection between cause and effect, and between process and performance.
A great coach underlines the necessity for drills, training and practice. They help identify goals and show how to get there. Trust and communication are essential to the relationship.I think of financial planners as a certain kind of coach. We work with our clients to help them reach their financial goals, and we show them what they should do to achieve them.
Financial advice and guidance are vital forms of financial education, applied directly to real situations. Certainly, advisers are the layperson’s guide to this world. They are technical experts in products and regulations with an obligation to make sure that their clients understand what they are buying. But, more than knowledge, we build skills – we build our clients’ confidence and earn it too.
The process begins with purpose. At a first meeting, we will ask a version of the questions coined by George Kinder, the father of financial life planning – “If money wasn’t an object, what would the perfect life be like for you? How would you spend each day? If you went to the doctor and he said you have five years to live, how would you spend it? If you had 24 hours to live, what would you regret?”
These are extremely helpful to get people thinking and talking. The questions are about life, but they are directed towards money and purpose.
As we work towards achieving these goals together, the relationship evolves. As clients become more familiar with the financial landscape, they become more technically adept in how to make their money work for them.
Starting with the bedrock, they will ensure that they have a reserve of easy-access cash set aside for emergency use. Next, they will have the confidence to adjust their pension and ISA contributions to optimise for tax efficiency.
Challenges arise or goals change over time, and we will adjust the regimen to take challenges or redirection into account. I’m not going to overstretch and exhaust this metaphor (overtraining is very bad), but you get what I mean.
Good financial planning not only insulates you from moments of shock – we stress test everything for bad times – but it can allow you to do more. Time and again, we have clients who discover that they can do more with what they have than they think they can – a couple who can buy the dream home for their retirement, the one they thought was out of reach.
Gaining an understanding of risk is an essential element of building financial confidence. It’s not just mastering the conceptual understanding of how the different asset classes in a portfolio work together to produce an increase in value over time. In fact, it’s up to the individual how much they want to dive into the granular detail of their investments. Some want to know exactly where everything is and how it’s doing; others check their tracker every morning to check the direction of travel; a few are extremely engaged with their individual equities and how they perform. This is the optional module.
But everyone has to negotiate their relationship with risk – it’s the price for fronting up and engaging with a process that will bring the greatest security and reassurance in the end.
A portfolio – a balanced mixture of asset classes, equities, bonds, property funds and cash – is designed to bring about above-inflation, long-term gain, even when headlines are screaming about market meltdowns.
Being knowledgeable and comfortable with risk is key. This kind of assurance and peace of mind is what we aim to instil in our clients.
One of the challenges for government is to give people confidence in the system but at the same time to encourage them to make confident decisions around their money. Where does financial education belong? Does a school module that outlines how mortgages, pensions or credit cards work equip people for the demands of the situations they will encounter in life? Only so far.
We see that some people tend to put off confronting financial issues until they have a specific problem. Bringing the right people onto your team in such moments can be transformative in the way you organise your money and how you live.
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