The value of financial planning

  • Financial planning
  • 3 minute read

Financial planning is an ongoing process that aims to help you meet your short, medium and long-term goals. Many people turn to professional help for advice when saving for a home, planning for retirement or when looking to build investments. It is of course, possible to create your own financial plan, although a specialist can save you time and is qualified to advise you on how to best meet your financial goals.

Here are five key benefits of financial planning.

Meet financial goals

Actively taking part in the financial planning process generally means formally discussing or writing down your financial goals. By realising what your goals are, you’re taking the first step to achieving them. As life progresses, there will be certain points where you’ll be thinking about making changes that relate to your finances, for example, getting a new job or nearing retirement. Your unique circumstances will play a significant part in how you build your financial plan. Working with a financial planner can help simplify and make sense of where you are right now and what you need to do to get to where you want to be.

Many people value contact with an adviser who will work to understand their unique circumstances and provide advice and solutions which align with their long term financial objectives. They can help you determine how much you need to save and invest to achieve your goals, as well as providing assistance with any immediate financial issues/ changes in your life.

When investment markets are as volatile as they have been in recent years, it can be useful to have someone reassure you as to the long term investment horizon. Bespoke investment advice is tailored to your objectives, according to risk tolerances, ensuring all bases are covered.

Improve financial wellbeing

94% of employees in the UK said they suffer with money worries in the Close Brothers Asset Management Financial Wellbeing Index[1], which shows just how widespread financial stress is. Taking your finances into your own hands makes it possible to feel more in control of your situation and therefore less stressed. Creating a budget and managing your cash flow can create more certainty over what money you have left over after usual expenditure.

There are certain aspects within financial planning that may require an extensive amount of planning and most likely, a qualified financial adviser will be in the best position to help. This may include thinking about what protection you need, so that if something unexpected were to happen, your family would be protected. People can feel reassured knowing that if something happens to them, their financial affairs can be passed on to either a spouse of beneficiary without complexity. Protecting financial assets with insurance, as well as the appropriate estate planning tools, can provide a sense of relief that your wishes are going to be met, no matter what happens.

Tax efficiency

Tax considerations are a priority for many when considering financial planning. There are constant changes to legislation that incentivise people to save for retirement. The assessment rates for income tax and capital gains tax could be important factors in determining how much you should save to meet your goals. By taking advantage of tax reliefs and allowances and consulting an expert in this area, it’s possible to maximise total net wealth.

A specialist can help you realise the value of good tax planning, by looking at the suitability of special investments, such as those that qualify for business property relief, venture capital trusts (VCTs) and enterprise investment schemes (EISs). VCTs and EISs can represent tax-efficient investments for higher-rate taxpayers in particular who are happy with the additional, and sometimes substantial, risks to capital that investing in smaller companies brings.

Transitioning into Retirement

Retirement is a significant transition for most. Annual reviews of your financial plan can help during this transition phase so you know the different options you have for withdrawing a retirement income and what the results will be in terms of yield and future income.

Structuring investments during retirement in a way that allows for flexibility helps when you may decide you want to spend more or less some years, for example, when planning to buy a car or go on luxury holiday. By creating a plan based on these needs, you can work out how much you will need to mitigate the risk of running out of money – and to enjoy the later years of life.

Seeing the “whole picture”

The value of financial planning can be seen the most when all the different parts of personal wealth have been contemplated, and a plan of action created for how you will meet both short-term and long-term goals. By looking at your entire financial situation regularly, your progress will become clearer and your plan can be adjusted according to any changes in your personal situation or financial objectives.

A research report by ILC-UK found that an ‘affluent’ group of people who had access to a financial adviser accumulated on average 16% more in pension wealth[2] than those who didn’t have an adviser. Therefore, it may be worthwhile to think about how you can get professional, trusted financial advice. From tax planning, to risk protection, to structuring investments, a price cannot easily be placed on the value of financial planning. It is a tool that provides what most people are looking for - clarity and peace of mind for your finances.

Capital at risk. Any tax benefits depend on your individual circumstances and tax rules are subject to change.


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