One day soon, everyone will have a Financial Plan
There will be no reason, and no excuse, not to plan for the future.
A serendipitous approach to personal finance has been the norm for a large proportion of previous generations. After all, what will be will be. Somebody else was responsible for their pension, they didn’t expect to live for very long after a fixed retirement age, they had limited disposable income and the options they had for their savings were limited, as were the government’s options for taxing them.
Within a generation we have moved into a new world of pension freedoms, longer life expectancy, widespread inherited wealth and a plethora of savings and retirement vehicles all with their own taxation complexities.
The notion that, in this increasingly complex environment where you are expected to take more responsibility for your own financial future, you would not have a well-constructed long-term financial plan setting out where you want to go and how to get there, will start to appear increasingly anachronistic.
Financial Planning is becoming “cool”. There will even be a “Festival of Financial Planning”, organised by the Personal Financial Society at the NEC in November this year. More than 2,000 finance professionals are expected to congregate at the cavernous venue in Birmingham and mingle in 4 “villages” each one celebrating a different theme of Financial Planning. There will be a central “village green” for disciples to socialise and exchange best practice. This is a gathering for finance professionals, but how long before members of the public are queuing on the M42 for their own version?
A Financial Planning week, under the slogan “life is better with a financial plan”, is held annually by the Chartered Institute of Financial Planning and is becoming more popular each year as people take advantage of a number of initiatives such as free initial consultations.
The driving energy for this change is the realisation that, with increasing complexity and individual responsibility, there is a potentially massive financial difference between actively engaging with your money and planning for your future as opposed to treating financial planning as a luxury for the “rich”, or an unpleasant optional chore that can always be put off to another day.
Put very simply, those who have their own, regularly maintained financial plan are likely to pay less tax, have better investment returns and achieve their personal and lifestyle goals more often. When this wisdom becomes more generally understood there will be a sea change in how we all manage our personal finances.
Cash flow modelling tools are at the heart of this revolution. In the right expert hands, they allow for the complexity of an individual’s unique situation to be included, yet produce an easy to understand graphical representation of their financial position as it unfolds over a period of say 20 or 30 years. Simulations are easy to create to allow the answers to any number of “what if” questions.
Responding to this movement is a new generation of Financial Planning firms and advisers who talk a language of personal values, goal setting and holistic advice. If you would like to be part of this revolution then I would advise you to seek out one of the financial planning experts who will be mingling on the NEC village green in November. They have seen the future.
The value of pension and investments can fall as well as rise. You may get back less than you invested.
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