The Value of Professional Financial Planning

Once considered the preserve of wealthy individuals, professional financial planning is now far more mainstream. Consumers from a very broad demographic range are today becoming increasingly aware of how financial planning can have a positive impact on their finances, and ultimately on their lives.

Evolution, not revolution

To understand this, it’s useful to consider how the world of being advised about personal finances has evolved for consumers. Evolution rather than revolution it has certainly been, this has not happened overnight…

Here’s a brief history lesson

Back in the day until maybe 50 years ago, personal finance solutions – generally in the form of life assurance and savings products were sold by door-to-door insurance company representatives. Products were simple, premiums were sometimes collected in cash and recorded in a book, and there was no choice of products available from the representative. You either bought the product available, or you didn’t.

Then insurance brokers emerged as a provider of these products. The difference from the door-to-door rep being that they were in a position to offer a range of products from a number of different life assurance companies. It was still just a ‘product’ transaction, but now with some choice of products and providers. Client choice was limited to a set range of set options.

This role evolved into Financial Advisers, where a broader analysis of a client’s financial needs is completed, with a recommendation made around a number of financial areas. This in turn identifies a range of financial product needs – usually in areas such as pensions, investments and financial protection products – which are then prioritised and purchased by the consumer, after the adviser suggests suitable products available in the market. This is probably the largest segment of the personal financial advice space in Ireland today.

Certified Financial Planners (CFP®)

But over the last decade, professional financial planners, who usually hold the qualification of Certified Financial Planner (CFP®), have emerged as a significant segment within the personal financial advice space. These financial planners take a much broader view of a client’s circumstances, helping them identify their goals in life, to build an understanding of the financial implications or requirements of these goals, and then put a plan in place to ensure these goals are achieved. They support people to take control of their financial lives, empowering them to feel more confident and stay on track to achieve their goals. Financial products, if required, are simply enablers to achieving a client’s goals.

The drivers of this evolution

There are a number of reasons behind this shift. First and foremost is better education and understanding of value by both consumers and also financial advisers. Consumers today are (often rightly) more sceptical about financial products, and willing to carry out their own research and ask more searching questions. They don’t place as much value in someone simply selecting a product for them. Alongside this, particularly the CFP® profession recognises how providing much broader and deeper guidance to clients across their financial lives results in long-lasting adviser/client relationships – both parties win.

Your Certified Financial Planner should think wider about your goals – considering aspects like where you are in life, your tax circumstances, your appetite for risk, and then engage in active discussion with you about options and scenarios to achieve what you want.

Second, technology has played a significant role, with financial planners having a range of technology solutions available that enables them to provide far more meaningful and valuable advice to clients in relation their financial lives. Technology also enables planners to deliver their advice in a far more engaging and effective way to clients, often requiring less time and effort on the client’s part.

Thirdly, more stringent regulation of financial advisers has also played an important and welcome role, raising standards across the advice industry as a whole. More transparency in relation to product charges and remuneration paid to the adviser, along with a greater emphasis on advice standards and information to be provided to the consumer, have been important developments too.

It’s all about the plan

As we mentioned above, financial planners take a much broader view, supporting you to take control of your financial life and plans. The starting point is with your life in general – your aspirations, goals and ambitions for your future. Once you can envision the life you want to lead by helpful questioning and guidance by the financial planner, your financial capacity to lead that life is examined. This can result in a range of scenarios, each of which can be considered by you with your Financial Planner to choose your path forwards. Examples of different scenarios might include:

• Realising your capability to have bigger aspirations in life, or alternatively needing to temper your goals in line with your financial circumstances.
• Saving more money or feeling free to spend more money, maybe starting today.
• Retiring earlier than expected. In some circumstances we’ve encouraged clients to retire that very day and start living the life they want.
• Feeling financially free to make a desired career change.
• Recognising that less investment return and risk is needed to achieve your goals in life. Or sometimes the opposite might apply.

The power of financial planning

This is the power of financial planning, it’s all about you, your life and your goals. The plan is driven by the goals you identify alongside your financial planner. Financial products may or may not be required, they are simply vehicles to achieve goals if needed. This removal of needing a product sale removes any conflict of interest for the financial planner.

In the old world of the insurance broker, a product had to be sold if the broker wanted to be paid, as their income was driven solely by commission earned on product sales. Commissions are often wrapped into a product, hidden or complicated to understand. These fees and charges are not clear or visible to the client and can negatively impact the return or value of the products or investments sold to the client.

A non-conflicted financial planner is paid a fee by the client, removing the conflict of needing a product sale.

It’s very important to ask questions, request a fee/commission breakdown and understand how the person who is advising you is going to be paid for the work they are doing.

Education & a different perspective

Working with a Financial Planner helps you to learn more about your finances and the options available to you. While there are plenty of articles, guides and technology available that can help you to DIY your financial planning, these lack the lateral thinking and personalisation that Financial Planning professionals bring.

Financial Planners avoid painting by numbers and instead consider your unique circumstances and requirements. For example, you might consider yourself to be risk averse and prefer to be more conservative with your investments. However, during conversations with your advisor, you may realise that you have the capacity and ability to take more risk and in turn receive more reward.

Families often benefit from engaging a Financial Planner when there are conversations around inheritance and estate planning to be had. These conversations can be easier and more beneficial when facilitate by a third party who has expert knowledge and experience advising in this area.

Financial planning is for everyone

A financial planner can add significant value to a wide cohort of people. A few examples of this include:

• Business owners -while some business owners may not feel personally wealthy at this stage in their lives, careful planning in relation to wealth extraction and ultimately achieving a successful exit from their business can be transformative.

• Women – there are numerous financial challenges that women must contend with. For starters, the gender pay gap, the differential between the average pay of males and females within an organisation, reported as 9.6% in 2022 by the CSO. This means that the average woman, even those in leadership positions, will be earning less than male counterparts in a similar role. On top of this, compared to men, women are more likely to leave the workforce for extended periods of time, reduce their working hours or stop working completely, particularly those with young children. These gaps can often make it harder for women to progress in their careers as well as leaving them with a reduced income. Women often tend to retire earlier than their male counterparts and because of the reasons above, may have a number of years where pension contributions were not made. All of this, means it is common for women to enter retirement with less saved than men of a similar age. Often more risk averse, women need to be well advised around their capacity and need to take risk, as well as their risk tolerance, to maximise their financial assets. To further increase the need for financial planning for women, their life expectancy at birth is 82.8 years, versus 78.4 years for men (Life tables 2010-2012), meaning their financial resources are needed for longer in life.

• Generation Y – Millennials, born between 1981 and 1996, are proving to be highly engaged with their finances and are open to the value financial planning can bring. Now established income earners, Gen Y is on the verge of receiving unprecedented levels of intergenerational wealth via inheritance or gifts. Nearly half of this age group already have, or are likely to, come into an inheritance or major financial support in the future. For some, the amounts will be significant and this will require careful planning.

The financial planner may be the hub of your advice team

One of the most valuable roles that a financial planner will undertake is as the hub of your advice team. Your financial planner will usually adopt a collaborative approach to working with your other professional advisors to achieve optimal outcomes. Where clients don’t currently have a required professional adviser, the financial planner can usually introduce them to one from within their own professional network.

Today, it is quite commonplace for financial planners to work closely with solicitors, tax consultants and accountants. These collaborations may be in order to optimise financial outcomes in relation to business exit, wealth extraction from companies, estate planning, wealth transfer within families, and other complex financial situations that may arise.

The benefits of working with a financial planner

Research consistently reveals that consumers are better off when working with a financial planner. One of the foremost pieces of research in recent years was carried out by the Financial Planning Standards Board in 2013 which included more than 1,000 adults in Ireland, only some of who are currently working with a financial planner. The main differences between people who are advised, and those who are not include:

• Quality of life – consumers who work with a financial planner experience a higher quality of life in relation to non-financial ‘personal assets’. These are the key supporting pillars of a ‘good life’, including personal health, connection, capability, purpose and life satisfaction.

• Financial confidence – advised consumers enjoy greater financial confidence, including personal expectations of security and ability to achieve goals and manage personal risk.

• Financial satisfaction – this measures personal satisfaction with a consumer’s financial situation including spending capability, personal financial risk management, ability to stick to the strategies in a financial plan and overall wealth. Advised consumers significantly outperform those managing their money themselves.

• Experience – advised consumers enjoy the directly attributable value of the experience of financial planning and working with a financial planner, as well as tangible financial benefits like financial gains and meeting critical financial needs.

In this research, the top 5 benefits of working with a financial planner, as identified by clients were:

Why Everlake might be for You

Our starting point whenever we’re asked this, is to let our valued clients speak on our behalf. We hope you appreciate their sentiments.

You can also read a little more about how financial planning sits at the heart of our business, as well as browsing our selection of free expert guides that cover a range of important financial planning topics. These are further supplemented by our collection of articles, which are regularly added to and cover specific and narrow topics in detail.

However, if we can blow our own trumpet for once, it is our team of experienced and caring professionals of which we are most proud. This team always goes the extra mile in the interest of delivering an engaging client experience and achieving superior outcomes for our clients.

Meeting your expectations

When you choose us as your Financial Planners, you can expect:

• To understand the rate of return you need to meet your stated goals.
• To receive a structured, personalised and evidence-based financial plan to meet your goals.
• Your attitude to investment risk and your capacity for investment risk to be reflected in the planning process.
• To fully understand the potential implications of the investment strategy adopted.
• Your financial plan to be quickly and powerfully adapted to changes in your circumstances.
• To receive simple, accurate and meaningful progress reports to show you your progress towards your goals.

What you should NOT expect

While of course we are delighted to enjoy longstanding and friendly relationships with so many of our clients, we are also intensely aware that you are seeing an adviser to guide you, and not a new friend. While always listening to your thinking and reasoning, you should not expect us to be a nodding donkey. We will challenge your thinking. This arose recently with a client of our who was, we respectfully felt, over-determined to buy a rental property. If it’s not the best decision for you, we’ll tell you.

You should also not expect us to simply encourage you to keep mindlessly saving and investing, with a view to just being richer. Because we’re more interested in your goals in life and whether you’ve enough financial resources to achieve them or not. If you do, we won’t tell you to keep saving.

We’ll tell you to think about how you should use your money – whether on yourself and your goals, your family, or other things close to your heart.