What is Lifestyle Financial Planning?
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Lifestyle Financial Planning has become popular in the UK over the last number of years, mainly because of the changes brought about by the banning of commission for any investment products. With similar changes being mooted for Ireland shortly, more Financial Advisers will switch to this new model of financial advice.
Before the arrival of Financial Advisers, life insurance and pensions were sold by insurance salespeople, with very little attention paid to the suitability of the product for the end customer. This led to some serious cases of miss-selling and damaged the reputation of the life assurance industry in general.
About 25 years ago, in an attempt to clean up its reputation, the industry introduced the “fact find”.
This document ensured that the insurance salesperson had to obtain a minimum amount of information about the customer before they could sell them any product and that product had to be suitable to their needs in accordance with the facts gathered in the fact find. Although this went some way to improving the process, it didn’t stop the sell at all costs practices that were rife, brought about by the commission only system.
Lifestyle Financial Planning goes much further than the fact find. As well as gathering all the hard facts about someone’s finances, it also finds out what is important to the client, what type of life the client wishes to achieve in the medium term and after they stop working. Lifestyle Financial Planning will help the client to establish life goals and assist in achieving those goals, as opposed to finding a gap and selling a product to fill that gap.
A Lifestyle Financial Planner should carry out an in depth audit of your current financial situation, then, based on that information, produce a lifelong cash flow forecast. My experience is that this helps the client to understand its importance and empowers them to make the right decisions so as to ensure they can live the life they desire without the fear of running out of money. Some people find that they can actually enjoy a few more luxuries, whilst others may have to take action to improve their situation.
Once all this has been done, recommendations are made as to how best to arrange the client’s finances and investments in order to achieve their goals. This should be done on a fee basis only without charging commission to ensure unbiased advice is given. Once implemented, the service will include regular reviews. These reviews are essential as circumstances will change over time, as will your plans, and it is essential to continuously adapt the plan to any such changes.
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