Building a fund to support yourself and your loved ones involves asking lots of questions, a process that begins even before you start developing your investment plan and continues throughought the years and decades of investment.
“It’s crucial to start with a clear understanding of your personal and financial goals,” says Ciara Ryan, head of wealth and general insurance at AIB. “Consider what you want to achieve in the short, medium and long term. Are you looking to buy a home, fund your children’s education or build a nest egg for retirement?
“The key is to align your financial plan with these life milestones. A financial adviser will work with you to establish your attitude to risk and will create a financial plan aligned to your needs and personal goals.”
Those goals are crucial to any plan making sense. If you don’t know where you want to end up, and define that clearly, then the plan won’t have any real shape to it.
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“It’s all down to goals,” says Marta Pelc, pensions adviser at Cantor Fitzgerald. “You have to ask the right questions to develop a plan, both of yourself and the professional you work with. Examine your personal goals and what changes might affect them, like a change in career.
“Start from yourself and look wider, at your family. Do you need to allocate capital to a milestone like weddings, house deposits or college funds? Do you need to put funds aside to help with illness or disability with a family member?”
These variables will set the theme. There’s no one-size-fits-all approach to wealth management. Several decades into this, you’ll probably wish there was but appreciate why there isn’t.
Essentially it’s a matter of data. Think of your life as one big server, containing all the information about who you are, how you generate income and how you spend it. The more of this data you can present to your financial planner, the better a programme they can write to optimise it all.
You may not be a computer but you can treat your life information as if you are and this can deliver the output you need. Of course, that calls for questions.
Emmet Leahy, head of financial planning at Davy, says: “What are you looking to achieve? That will set the theme. That involves examining the specific circumstances that will impact you and the resources you have to achieve your goals.
“You want to put structures in place that are tax efficient. Pensions are an obvious part of that – making sure you have the right one in place is important. It’s only when you have the structures in place [that] you know what type of investments you should be looking at.”
The best way to plan for the future is to start at the earliest possible opportunity. It’s never too soon to start thinking about later life.
“Most customers say they wish they had put a financial plan in place sooner and, once they’ve a plan in place, regularly refer their children, and wider family members, to get one in place early on,” says Ryan.
“By starting early you can take advantage of compound growth on your savings, investments and pension, which can significantly boost the funds available to you but it’s never too late to start.”
You have to consider a macro perspective and make it micro. Take into account all the things that could affect your plan and then focus on what you can control.
“Several factors need to be taken into account, such as your current income, future earning potential, family circumstances and risk tolerance,” says Ryan. “Your lifestyle, ambitions and even your health can all play significant roles in shaping your financial plan.
“Someone with young children might prioritise education savings and life insurance, while someone nearing retirement might focus more on pension planning and tax-efficient income strategies. Try to be as prepared as you can be. That involves pulling together information about your expenses, along with any insurance and other policies you might have.”
Retirement is obviously the big goal. When setting up a wealth management plan, working out when you can stop investing and use that nest egg is the endpoint for many. The when isn’t the only factor.
“It’s not just about when you can retire,” says Pelc. “More people are taking staggered approaches to retirement, reducing their hours and days working. It’s almost a form of part-time retirement before fully retiring.
“With high-net-worth individuals, where you plan to retire is also a big question. Greece has become a popular place for retirees. It used to be Portugal. Wherever you plan on retiring to, what sort of income will you need there? Once you have goals. Then you can look at where you are at the moment, where you would like to be and the changes required to get there.”
I have three kids. The cash management and information flow you get from that is considerable. I know that I am going to have certain bills coming down the track, like for college or future weddings
— Killian Nolan, Cantor Fitzgerald
Donald Rumsfeld famously coined the term “unknown unknowns”. In wealth management planning, these are particularly important. Being ready for what you don’t know that you don’t know may sound implausible but there are actions you can do to mitigate unforeseeable macro factors.
Killian Nolan, director of intermediary distribution at Cantor Fitzgerald, knows all about this. He offers advice on wealth management, having been on the other side of the table as well, getting advice from a financial adviser for his own plans.
“I’ve gone through the process, trialling and testing it,” he says. “I have three kids. The cash management and information flow you get from that is considerable. I know that I am going to have certain bills coming down the track, like for college or future weddings.
“It was a real eye opener for me. The questions being asked really got me thinking about it. That got me thinking about what would be needed with upgrading and changing cars. All of it gave me a really clear picture. It’s fluid and flexible, it has to be continually reviewed because the answers you have today may not be the same a year later.”
Nolan stresses that constant communication with advisers is the only way to ensure that a plan is built to withstand those unknown unknowns.
“It’s about ongoing communication. It’s a life journey with your financial adviser and they’re with you along the way. It’s worse than going to Confession. When you go into the adviser, they know your every intimate spend and secret.
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“It’s the only way to do it. If you’re not giving the right information, there’s no way they can give the right answers.”
While it may seem daunting, particularly with a professional getting to know you as well as anyone else in your life, it is worth the effort. The goal with wealth management is to ensure all factors are accounted for.
“It’s not a matter of sticking it all on red. You want a diversified strategy with cushions in place. You want a level of risk that doesn’t keep you up at not but also be able to focus on short-term solutions,” says Leahy.
“You have to understand what you need to make it last for your retirement. Markets will go up and down but that’s where it comes back to having your investments diversified.”