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1 T O T A L W E A L T H M A N A G E M E N T provisio chartered financial planners Financial Planning: an introduction Navigating through life s changes

2 T O T A L W E A L T H M A N A G E M E N T

3 provisio.co.uk provisio chartered financial planners Table of Contents The Power of Planning Building for your financial future The Five Steps of Financial Planning Putting it all together and updating your plan Practical Applications for Financial Planning How to use the output from your Plan More Information about Provisio Chartered Financial Planners Professional Assistance Financial Planning Worksheets A-D Resources to help you plan for the future P R O V I S I O - T O T A L W E A L T H M A N A G E M E N T

4 provisio chartered financial planners The Power of Planning Financial planning is the process of managing your finances effectively to meet your life goals. The financial planning process will help you look at the bigger picture of where you are financially. Ask yourself... Can you consider the short and long term effects of financial decisions on your life goals? Can you adapt to life changes? Do you feel secure that your financial goals are on track? Are you viewing each financial decision as part of a whole? Planning for your future demands that you stay focused on your goals, which will change from time to time. Financial worries do not necessarily derive from lack of money, but more often from lack of planning. The aim of Financial Planning is to help you to identify and achieve your financial goals and objectives in order that you may achieve the lifestyle you desire. To us, financial planning provides a direction and meaning to all your financial decisions. Knowing where you are now, where you would like to be and how to achieve all your financial goals. 1 P R O V I S I O - T O T A L W E A L T H M A N A G E M E N T

5 The Five Steps of Financial Planning: 1. Identify your Financial Goals The Financial Planning process begins by helping you list all of your life goals, especially those that will require financial resources beyond your current income. Next, you determine the target date by when you would like to achieve the goals and finally, determine the amount of capital you will need. 2. Calculate Your Net Worth Once you have identified your goals, together we will determine where you are now and calculate your net worth: assets less liabilities. This step helps create a current financial picture. This provides part of the foundations for the start of the Financial Planning exercise 2 P R O V I S I O - T O T A L W E A L T H M A N A G E M E N T

6 The Five Steps of Financial Planning: Continued Evaluate Your Income Knowing your income and expenditure is important in helping you to achieve your financial goals. We will ask you to list your current monthly Income and Expenditure. It will be useful to categorise expenditure dependent on need, e.g. Basic, Leisure and Luxury. You may wish to use bank and credit card statements to help you obtain more accurate information. Coupled with your Net Worth, you have now identified the resources available to help you achieve your goals. 3 P R O V I S I O - T O T A L W E A L T H M A N A G E M E N T

7 The Five Steps of Financial Planning: Continued Resource Analysis Having identified your goals and resources, the next step is to analyse the information provided. This analysis will usually begin with a look at your financial foundations and consideration of the gap between your goals and reality. Will your foundations help protect you against unexpected losses that might otherwise keep you from meeting your goals? We will consider reviewing your Insurance Policies, look to establish an emergency cash fund and review your Will and any Lasting Power of Attorney. Take time to ensure that you fully understand your financial position, aims and objectives. Only by doing so will you maximise the benefit of Financial Planning 5. Plan Ahead Your Personal Financial Plan will analyse your current financial arrangements and consider how they can be better utilised. Using a lifetime cash-flow forecast, your financial objectives will be considered based on assumptions you have agreed. Adjustments may also need to be made to the plan, to re-evaluate your life-long goals and anticipate economic factors that affect your plan. Rate of inflation Your income tax bracket Interest rates Overall economic conditions 4 P R O V I S I O - T O T A L W E A L T H M A N A G E M E N T

8 Updating Your Plan Ultimately there are likely to be one of three outcomes in your financial plan. Either, your assets will grow indefinitely, you will eventually run out of money, or your asset base will grow until retirement and then gradually deplete. Action needs to be taken for each scenario... Scenario One If your assets continue to grow indefinitely then you may wish to consider reducing the investment risk you are taking to achieve your goals. You could also plan to achieve these goals earlier and consider the use of IHT efficient savings products to preserve your wealth for Scenario One the next generation. Scenario Two If you eventually run out of money you may wish to reduce your expenditure. Alternatively, review your expectations - are they realistic? You can look to make your investments more tax-efficient and consider increasing your investment risk. Scenario Three The ideal scenario is for your asset base to deplete gradually in retirement. Ultimately, the ideal scenario is to run out of money on the day you die! Admittedly this is very difficult to plan for but as long as you have disinherited the HMRC on death you will have Scenario Two achieved the final goal. Any assets below the nil rate band on death can be passed through your estate into the hands of your beneficiaries free from Inheritance Tax. We will review your plan at least once each year and at significant life events - such as marriage/civil partnership, birth or adoption of a child, purchase of a new house - so it reflects your changing goals and financial situation. This exercise needs to be repeated regularly. If your income increases, you may find ways to accelerate your Scenario Three savings, then you will accelerate your progress toward 5 P R O V I S I O your goals. Be prepared to modify your goals if you suffer a set back. The key is to remain flexible. - T O T A L W E A L T H M A N A G E M E N T

9 Practical Applications for Financial Planning Now that you have completed your analysis, it is time to take action but how? For Individuals Here are some questions to ask yourself Could you increase the amount you are saving? Could you earn more/spend less? Are you spending too much on impulse purchases? Are you neglecting long-term saving goals? Are your goals too ambitious? Could you change or eliminate any of your goals? Could you delay the target dates of your goals? We will work with you to achieve your goals through the various stages of your life, whether you are creating wealth, protecting against the unforeseen, preserving & consolidating, or ultimately distributing your wealth to those closest to you. We will help you: Make the most of your time after work ends (planning for retirement) Provide for loved ones tax efficiently (planning for death) Maintain your financial security through times of poor health (planning for sickness, incapacity or long term care) Do the best for your children (planning for education) Navigate the maze of investment options (planning for tax efficient investments) For Business Owners Your business is often an extension of your own personal affairs and Financial Planning can help you extract value from your business and plan for retirement. Financial Planning can also be used to help minimise the impact on the business of the death or illness of its key staff and shareholders. Pension and Divorce All of our Financial Planners have undertaken extensive training and received individual accreditation from Resolution to act as Financial Neutrals in Collaborative divorce cases. Financial Planning can help you understand the true value of your wealth and help you rebuild following a divorce. 6 P R O V I S I O - T O T A L W E A L T H M A N A G E M E N T

10 More Information About Provisio Financial Planners Provisio Limited operate a bespoke Wealth Management Service that brings together four distinct areas of financial stewardship under one simple fee structure. Financial Planning Future cash-flow analysis Risk analysis Portfolio management When combined together effectively, these four disciplines will ensure that you are always best placed to achieve your financial goals, regardless of any changes in circumstances that may occur. Financial Planning A Certified Financial Planner will provide you with a personalised report detailing recommendations that address your financial goals, based on the information you have provided. A meeting will be arranged to discuss the contents of the report and to help you understand the strategy that has been proposed, you can then make an informed decision whether to proceed. Future Cash Flow Analysis Visual cash flow analysis software will be used to provide you with accurate answers to the big questions that matter most. You will be able to see what we are saying, why we are saying it and how it will benefit you. Risk Analysis Through a series of risk-graded model portfolios you are able to access carefully managed low-cost investments that best suit your return expectation and more importantly ensure the level of investment risk you undertake is acceptable. Portfolio Management We use modern internet based technology to streamline investment transactions, administration and service, whilst also providing a single view of all your investments at any time. The Financial Conduct Authority (FCA) does not regulate Financial Planning. Instead, the FCA regulates financial planners by the services they provide. All Provisio Financial Planners adhere to the Codes of Ethics and Practice as defined by the Institute of Financial Planning (IFP) and are regulated as Independent Financial Advisers by the Financial Conduct Authority. 7 P R O V I S I O - T O T A L W E A L T H M A N A G E M E N T

11 provisio chartered financial planners Financial Planning Worksheets

12 Remember to allow for inflation, 2 3% per annum will suffice.! Financial planning worksheets Step 1: Identify Your Financial Goals List all of your life goals, especially those that will require financial resources beyond your current income. For example, if your goal is to buy a holiday home, you may list Deposit for Holiday Home as your goal. Next, set the target for when you would like to achieve the goal. Finally, determine the amount of capital you will need. Financial Goals Work Sheet Exa mples Goal 3 years or less 4-6 years 7 years plus Time Time Time Deposit for Holiday Home 4 25,000 Income in Retirement 5 27,000 Gross per anum When you have completed the Financial Goals Work Sheet move on to Step 2 A P R O V I S I O - T O T A L W E A L T H M A N A G E M E N T

13 Financial planning worksheets Step 2: Calculate Your Net Worth Once you have established your goals, the next step is to determine what you will need to achieve those goals. Complete the Personal Financial Statement to calculate your net worth - assets minus liabilities. Personal Financial Statement Assets (Own) Liabilities (Owe) Cash Savings Account Emergency Fund Other Sub Total ISAs (inc. PEPs) Mortgage Personal Loans Car Loan Credit Cards Other Total Liabilities: Investments Direct Equities Bonds Sub Total NS& I Sub Total Main Residence Other Property Sub Total Business Vehicles Other i.e. art, collectibles Sub Total Summary Total Assets: Pension Other Sub Total Total Assets (not inc. Pension) Total Liabilities Net Worth As of date: / / B P R O V I S I O - T O T A L W E A L T H M A N A G E M E N T

14 Use the Income & Expenditure Summary below to estimate your current monthly figures. It may help to use bank and credit card statements Financial planning worksheets Step 3: Evaluate Your Income Once you have completed your Personal Financial Statement, you should be able to identify the resources available to help you achieve your goals. Do not be concerned if you have less than expected. Net Worth is just one aspect. Earned and Unearned Income e.g. salary, investment distributions etc, are important in helping you to achieve your financial goals. Determine how much is coming in, how much is going out and where it is going. Income Salary Income from Self Employment Dividends Interest Rent Pension Children & Grandchildren Childcare / Baby Sitters Clothing & Footwear Education Expenses Pocket Money Other Children's Expenses TOTAL Other TOTAL (A) Housekeeping Expenses Electricity Gas Water Rates Council Tax Cost of Servicing Debts Mortgage on Main Residence Mortgage on Other Property Hire Purchase Bank Loans Bank Charges Maintenance Payments Other Similar Expenses Home Telephone TOTAL Repairs & Renewals Garden/Gardener/Plants etc PAGE TOTAL (B) Help in House Expenditure House & Contents Insurance Other Insurance TV Licence Sky / Digital TV/ Modems Internet Housekeeping, Food., etc Wines & Spirits Laundry & Dry Cleaning Pet Foods Holiday Home Expenses Other Private Annual Expenses TOTAL C P R O V I S I O - T O T A L W E A L T H M A N A G E M E N T

15 Financial planning worksheets Step 3: Evaluate Your Income Continued... Own Clothing & Footwear Life Assurance Premiums Partner's Clothing & Footwear Cigarettes & Tobacco Holidays Subscriptions (Excl. AA/RAC etc) Investment & Life Assurance Endowment Premiums Pension Contributions Regular Other Savings & Investment Eating Out TOTAL Personal Expenses Christmas & Birthday presents Sports / Hobbies BUPA/PPP/WPA Health Insurance Mobile Phones CD's/Books/Newspapers Spending Money Gifts to Charities Professional Fees Accountants fees (non business) Dentist's fees Doctor's fees / prescriptions Optician's fees Veterinary Surgeon's Fees TOTAL Travelling Expenses - not Motoring Other Personal Expenses PAGE TOTAL (C) TOTAL Car Tax Motoring Expenses Car Insurance Petrol & Oil Servicing & Repairs AA/RAC Subscription Other Motoring Expenses TOTAL Summary Net Monthly Income (A) Less Total Monthly Expenses (B+C) Net Cash Flow (Deficit) C P R O V I S I O - T O T A L W E A L T H M A N A G E M E N T

16 You should also contact your Solicitor regarding estate planning including a Will and Power of Attorney. Financial planning worksheets Step 4: Resource Analysis Now that you have identified your goals and resources, the next step is to analyse your resources and begin your plan. Emergency Funds This analysis should begin with a look at your financial foundation. That foundation helps protect you against unexpected losses that might otherwise keep you from meeting your goals. This begins with an emergency fund of easily accessible savings. Most experts recommend that this should be equal to at least three months of basic living expenditure. To protect you from unexpected expenditure or unemployment. If you do not already have an adequate emergency fund, consider making it a priority on your list of goals. Keep your emergency fund in a liquid, easily accessible account such as a savings or current account. Insurance Unfortunately, even an emergency fund cannot prepare you for a catastrophic loss or illness. Most individuals use insurance for these costly emergencies. The most common types of personal insurance include: Car Health Critical Illness Personal Liability Property Life Disability It is important to review your current coverage at least annually to determine whether your are adequately covered. Remember to factor in group coverage provided by your employer. You should also contact your Solicitor regarding estate planning including a Will and Power of Attorney. Your Will Insurance Basic Provisions Policy 1 Solicitors Name Policy 2 Address Telephone Policy 3 Executor Discretionary Will Trust: Yes No (please tick) Policy 4 Power of Attorney: Yes No (please tick) D P R O V I S I O - T O T A L W E A L T H M A N A G E M E N T

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