It’s really easy for a financial planner to sell certainty to a client. Promises can be made about future investment returns. Financial planning software can show you anything you want it to if you fiddle with the assumptions in the background.
In reality though, we know that we live in an uncertain world where things can change in an instant, whether that’s personally (such as health or job security) or the world at large (the Ukraine war or high inflation).
Recently we’ve been able to show many of our clients that despite the high inflation rates and (albeit relatively small) stock market downturn we’ve experienced, they can afford to continue to do the things they want to do. They’ve told us that, without our reassurance, they might have stopped booking the holidays for a while and waited for the storm to pass. There was no need to do this, even though the financial press told them otherwise.
Time passes quickly and, especially when we’re advising older clients, we’re very conscious that there’s a window of good health that needs to be taken advantage of.
We’ve modelled how things will look if high inflation persists and/or investment returns are disappointing for a while. The plans that we have created for them have proved to be pretty robust.
We’re not selling certainty though and we have realistic discussions about the range of possible outcomes and how they might impact our clients’ lives. Together we can then make reasoned judgements about spending and gifting levels.
The truth is that investment markets are always uncertain in the short term and much more certain in the longer term. We can point to the long-term data and confidently say that all downturns will be temporary. For the level of risk being adopted by any individual, we can give them a decent idea of what a good or bad outcome will look like – what you’d need to consider is would your lifestyle have to change if your investment returns are on the low side?
In practical terms, we’d calculate your financial capacity to take risk. We work out how much money you’re likely to need for the next few years and make sure that this money is in secure assets ie it’s only money that isn’t required for a number of years that will be fluctuating in a major way.
The world is and will always be uncertain, but having a calm, caring, empathetic adviser can help you keep it everything in proportion. There might not be any need to stop booking the holidays after all.
If any of the above resonates with you, we’d love to hear from you. No charge for a chat.