The Importance of a Plan.

What does pizza and Peroni’s at a Sicilian seaside café, fly fishing the beats of Scotland, sending your kids to study abroad and an early retirement (as a few examples of potentially many ‘wish list’ items) have in common? The answer is not ‘figments of imagination’. Every day, ordinary people around the world are checking items from their wish lists. The answer to the question – what alchemists wish list items, is a plan. Think about it, behind every success story – be it weight loss, finishing the Comrades, graduating, raising children and of course successful retirement – is a plan.

“Someone’s sitting in the shade today because someone planted a tree a long time ago.” – Warren Buffett

Research shows that those who have a quality relationship with an accredited financial planner are 60% more likely to achieve their financial goals. In a country where just 5% of the population can afford to retire and maintain living standards, a 60% boost is a gift. The adage, “failing to plan is planning to fail”, rings true not just for financial planning, but all planning. Unless one has inherited or has access to unlimited wealth, one will need a plan to check those wish list items. The excuse that only the rich can achieve financial freedom is a lie that prevents many from beginning the process of implementing a plan. The truth is that most of us don’t know where to begin, we spend badly and fail to get our money working; at the same time always hoping that one day, one day, things will get better. Like dieting using only wishful thinking ‒ sliding on those ‘97 Levi’s is likely to be a deflating experience.

What is needed is a plan.

A good plan colours potential and shows what can be achieved by following the steps. However, ‘potential’ is a perishable commodity and each year we fail to implement, the road ahead gets rockier and more treacherous to pass.

The role of an adviser is often overlooked, in a world where asset management and big returns are all the hype. A big return is always exciting, but what good is a return misspent? A sound financial adviser will rationalise the world of financial planning and asset management, so that an investor will understand what he or she is getting involved with.

Critical aspects a good financial adviser should cover include:

  • Efficient costing and transparency. A truly independent adviser should be able to pair advice with the most cost-efficient solutions, allowing for efficient growth of capital. The difference between a non-conflicted portfolio and one that is not, can save the investor as much 5% in costs per annum. It is important to know what your total cost will be, before signing any investment forms.
  • Independence. It is critical to ascertain if your adviser is truly independent. A key differentiator is how a practice earns revenue. A company that earns by charging for advice dispensed only ‒ and not from selling products ‒ is deemed an ‘advice-only’ practice. When seeking advice, it is crucial to ascertain on what basis a practice earns revenue. By asking this, one can determine whether a company is truly independent or not.
  • Asset allocation. Research asserts that the biggest driver of returns (by a country mile) is asset allocation, and not fund or stock selection. A sound adviser will stress the importance of asset allocation, as well as the ongoing maintenance of asset allocation.
  • Retirement. You need to know how much will be required and how you can most efficiently reach this value in order to provide you with a sustainable income.
  • What type of investments are suitable? There are literally thousands of portfolios and structures in the investment universe. Unless you are a well-versed investor, you’ll need a qualified adviser to declutter the chaotic sphere of investments. Structuring a portfolio correctly can shave years from one’s working life and enhance retirement capital significantly.
  • Risk analysis. A good adviser will ensure you are aware of any risk cover shortfalls and how to best remedy that.
  • Tax! One of the most complicated areas in the financial universe is tax. There are simple changes that can be made today which will make the road ahead less difficult. A good financial planner can share these tips with you. For example, have you ever heard of ‘Capital Gains Tax Harvesting’?
  • Income management. Are you aware that there are simple, free structural changes that can be made to your income portfolio that will see to an extension of retirement capital and income?
  • Simplicity. Capitec said it best, “Simplicity is the Ultimate Sophistication”. A good adviser should take the edge off any investor’s anxiety by presenting options in a simplified, easy to understand way. One should never sign a form unless the terms have been explained and are completely understood.

What makes life exciting is that it is not a straight road. There are downhills, uphills, curves, bumps and at times dreaded ‘stop-goes’. Significant others need to be wooed, children need to be schooled, lawnmowers need to be replaced, Ireland needs to be seen … the list goes on. A quality adviser will make provisions for the downhills, uphills, bumps, curves and said ‘stop-goes’ in your plan. Your wish list is valuable so treat it with respect and care.

Harbour Wealth’s stable of qualified, experienced advisers is available to field any questions and help you begin the process of converting wish list items to real life experiences.

Harbour Wealth - Marc Schroeder Senior Wealth Manager