When working with a client, we should by now have got to know each other pretty well and I will have spent a lot of time listening and teasing out my client’s lifestyle goals. In terms of how my clients sees their life’s path, we’ll have discussed ‘where they want to be’ and when they aim to be there and we’ll have dug a bit into the ‘whys’. Together we’ll have studied their income and any assets they currently have or may have in the future.
All in all, we should have a good route outlined; we know broadly where we are aiming for and we’ve also got an accurate measure of the resources we have to get there.
There’s an old saying about working for your money or your money working for you. As a Financial Adviser, my job is to make sure that your money is definitely working for you. I use my experience and knowledge to ensure that your investments and assets are used in the most efficient way, providing income when it’s needed based on all the previous planning we’ve done.
As an Independent Financial Adviser, I’m not tied to any particular company’s products, I can select products based purely on whether they are the best fit for my client. Many Financial Advisers are restricted to a small panel of products or even directly to their employer’s products and whilst this doesn’t mean they will do a bad job, when you only have a hammer every job starts to look like it needs a hammer.
I have extensive knowledge and access to a wide range of investment and protection products, and many are often not easily accessible to the general public.
It isn’t just access to specialist products, as your Financial Adviser I may be able to save you money on more ‘everyday products’. Take life insurance as an example. Let’s keep it simple and assume we’re only looking at a policy to pay a lump sum on your death. We’ll also assume you’re not a higher rate tax payer. If you had more cover or were a higher rate tax payer you’d save even more money.
So, a straight forward decision; you need a policy that will pay out a lump sum at any point over the next 25 years. You’ll find plenty of places to buy life insurance and let’s say a policy that costs you £50 per month will give you sufficient cover. Most of the policies seem to have similar terms and conditions so what’s the difference between them? There probably isn’t much difference between the policies, but where there might be a big difference is how you pay for the policy.
As your Financial Adviser not only would I advise on a policy but I’d also look at the most cost effective way for you to pay for it. For instance, if you could pay for the policy via your company, it might be substantially cheaper for you. Think about it, if the policy costs you £50 per month and you pay for this personally, rather than via a company, your £50 will come from your income after you’ve paid income tax and national insurance. If your company pays for the policy, the company will be able to claim corporation tax relief on the payment and your income tax or national insurance will have nothing to do with it! The bottom line is that by a company paying for the policy, you’ll save 40% over the cost of you personally paying for it. You get the same cover, but your Financial Adviser has just made it 40% cheaper! If you look at the table below, it’ll show you how the figures stack up.
I must point out that there is certain legislation1 that these policies need to comply with in order to qualify for the tax relief. So it’s not something that can be done with any insurance policy.
That was just a simple example of how a straight forward product many of us have can be funded more efficiently, given the correct knowledge. Decisions such as this are what your Financial Adviser should be making with you based on their knowledge of products available, but just as importantly, the best way to use them.
1. defined in subsection 393B(4) of the Income Tax(Earnings and Pensions) Act 2003 (‘ITEPA’)