What Is Your Number?

The Number

Many prospective clients I meet have a number. This is the amount of capital they think they need to enable them to feel financially secure. In investment banking circles, this is often known as the ‘F**k You’ number – the amount an investment banker thinks they need before they can leave and do something else.

In most cases the number is arbitrary, a nice round number that is attainable in a few years’ time often coinciding with a life event – the children leaving school or university, for example, or the maturing of share options. For many people, in a few years’ time, a new number will replace the old one and life will carry on.

Although there is nothing wrong with this approach, there is usually no meaning attached to the number and this is where our Lifestyle Financial Planning approach can play a crucial role.

Through our Discovery process, clients can articulate their desired lifestyle which we can then quantify and model using our sophisticated planning software.

‘Begin with the End in Mind’

To borrow a phrase from Stephen Covey, the planning process often begins with the ‘end in mind’. In other words what are you trying to achieve and what do you want your life to look like?

You might have a definite plan on where you want to get to, for example, you might be considering a career move.

I worked with a Management Consultant in his mid-forties who was looking to move from a large consultancy to join a start-up firm. This involved buying into the company via a share purchase with the objective of increasing the share price over a specific time-period. The rewards were significant but there were clearly risks. Within the client’s financial plan, we earmarked the required capital injection and were able to identify that, should things not work out, the client’s family would be financially secure.

You might be clear on when you would like to retire and, as such, we can help you articulate what your desired lifestyle might look like in retirement and identify whether you have sufficient capital to achieve this now or whether you need to accumulate further capital.

I know many clients welcome the reassurance of knowing that, using conservative assumptions, they can afford to retire and the choice to work is theirs.

Alternatively, you might be perfectly content with where you are now and just want the reassurance that your wealth is being managed in the best way possible.

Where are You Now?

In order to help clients move towards their desired lifestyle, it is important to establish where they are now. To do this, we review their existing assets and help identify the following:

Do they have a coherent investment strategy in place or have they accumulated a range of assets over time, perhaps selecting investments because they happen to be the ‘flavour of the month’ at the time.
Are they taking too much risk with their portfolio, for example, are they concentrated in a particular asset class or sector?
Do they have sufficient liquidity – a lack of liquidity is surprisingly common especially where clients hold significant share options, property or private equity.
Conversely, are they holding too much cash?
Are they making full use of available tax reliefs?
Are they aware of where their money is invested and what impact their investments are having on the world?

Are You and Your Family Protected?

As part of our planning process we will look at what would happen in the event of death or incapacitation of the client or their spouse or partner. Quite often we find:

Those clients who earn significant bonuses may find that their employee benefits are based on a multiple of their basic salary and not their bonuses and there may be a need for additional cover.
Where clients change jobs, perhaps to a smaller firm, they may find that they don’t have the same level of employee benefits so, again, additional cover may be required.
It is particularly important to consider the impact of death or incapacity of a non-working spouse, in particular, around childcare?

The Financial Planning Strategy

This is where we design a strategy to take a client from where they are now to where they want to get to. Often, it involves modelling a few different scenarios depending on the client’s circumstances.

The strategy will also look at putting in place a coherent investment strategy taking into account risk, return and impact.

For those clients looking to accumulate capital, we can design and implement a savings strategy and for clients looking to turn on an income stream, we can design a decumulation strategy.

Our Process

We work collaboratively with clients to help them articulate the life they wish to lead. For busy professionals, this can take some time as, often, it requires a period of reflection. Over time, the financial plan can be refined and planning strategies tweaked to take into account changes in circumstances.

Conclusion

Having a number is great but often the number has no meaning attached to it. It might be too big or too small and it might be holding you back from achieving the lifestyle you really want to lead.

We know how busy work can get so it is extremely important to work with a trusted planner to ensure that your wealth is properly managed and to help you achieve your desired lifestyle.

Contact Us

If you want to discuss your number and see how Lifestyle Financial Planning and our Discovery Process can help you, please do get in touch.