Happy New (Tax) Year! I’m sure you’ve already received enough post reminding you of pension and ISA contributions without me adding to the noise. However, if you’re scratching your head and trying to decide exactly what you need to do, you know where to find us…
This month, I wanted to take a moment to tell you about a recent experience we had here at Brighton Financial with some new clients. Let’s start at the very beginning.
The Back Story:
Like many people who come to see us, when these clients first walked through our door, they already had investments and pensions that had been set up some time ago by a different financial advisor. The clients told us that their previous advisor had promised them great returns with little risk (sounds great, right!), which was exactly what these clients were looking for. Like so many, these clients trusted the suit and went with the FA’s advice.
Unfortunately, the reality didn’t live up to the promise and, as with all investments, there was risk. More risk than they knew, and they saw a significant fall in the value of their pensions and investments. Because the investment markets are unpredictable, this can potentially happen to anyone who invests, but when it came to the clients in this story, they hadn’t been educated about the risks and were shocked to learn that their investments were losing value. As you can imagine, this didn’t make them happy.
What made the situation even worse was that the pensions and investments that were set up for them weren’t as simple as they were led to believe and there seemed to be countless companies associated with their money. When they wanted to find out more about their arrangements, it was nearly impossible for them to get anywhere. Luckily, they came to us.
All The Pieces of Their Pie:
When we first met these clients, they were feeling betrayed and disillusioned with the entire financial services industry. They felt they were the last ones to know anything and that lots of hands were taking money out of their pie without understanding what they were getting in return. Unfortunately, we see new clients who feel this way all too often. In fact, if I asked you right now, “How much are you paying for your investments and pensions and who’s getting served pieces of your pie,” could you honestly tell me?
After having an initial chat with them– not a hardcore facts-and-figures meeting, just an introductory chat– how they felt about their financial situation was apparent. We were also able, in this brief chat, to determine what this couple wanted their money to do for them. By giving them a space to express how they felt without judgement (we never judge), we were able to hear exactly what these clients expected and wanted. From there, we just needed to work out what they needed to do to move forward.
Happily, after this first meeting, they felt reassured and engaged us to find out what was going on with their existing arrangements. Believe me, this was hard work, but we got there in the end and discovered that there were five interested parties involved in their arrangements: The product provider, the fund managers, the managers of the fund managers, the trustees, and the original advisor who was still receiving a commission. That’s an awful lot of pie to be serving up!
Baking a New Plan:
After reviewing their situation, we made some recommendations to simplify their arrangements, reduce the number of organisations involved, significantly reduce their costs, and set-up their investments in a way that the clients could easily understand.
We didn’t promise them the earth when it came to investment returns (we can’t make promises like that) but we do believe that the investment markets are broadly efficient and deliver acceptable returns in the long-run.
The most important thing we did for these new clients was to put them back in control of their pensions and investments. We made them feel like the bosses, not the minions, and by putting them in control, they felt empowered to be able to get one with their lives while knowing we had their backs if they needed us. With this new arrangement, we do get a part of their pie, but it’s a lot less than what they were giving away before, which makes us all happy.
The Crust of It (see what I did there?):
When it comes to your pensions and investments, we encourage you to be aware of the costs you’re paying and to be clear on what it is you actually own. Hand on heart, do you know what you’re paying and how much risk you’re taking? We hear clients say things like, “I’m a medium-risk investor” or “My investments are low-risk” but what does that actually mean? And what does that mean to your advisor? Does this interpretation tie-in with the amount or risk you’re actually taking?
In a perfect world, we’d never meet a new client who needed us because their former advisor compromised their investments and left them feeling confused and frustrated. In a perfect world, we’d all have the resources to receive helpful, honest advice and know that we had a team we could trust when we needed help. That’s why we take each of our clients through our bespoke process for getting to know you and establishing how much risk you can take and are comfortable taking. (Read more about how we establish risk, and learn more about our process if you have questions of your own.)
Because we don’t yet live in a perfect world, there are many people out there who aren’t being treated as well as they should when it comes to managing their pensions and investments. We’re passionate about treating people fairly and helping them thrive because we believe that when you thrive, we all thrive. After all, there’s more than enough pie to go around!