WHAT IS an effective Values-Based Financial Plan?

Certainly, a great deal of the answer is that the most effective financial life plans are much more than just a thick book of assumptions and calculations for people to wade through. It's the substance of the whole relationship between the client and the planner and what takes place.

Whenever I ask clients, “Do you want a neatly presented giant book of calculations or extra face to face time?” they always go for the latter!

The ‘number crunching’ and workings need to be done to create the plan, but it’s for our use to produce the plan and recommendations rather than for you to wade through and risk being confused (although all ‘working’ papers can be seen if you ask).

So what is Values-Based Financial Planning? Simply put, it can be represented by this diagram:

The Resources are:

• Assets
• Liabilities
• Income
• Your Skills
• Your Abilities (to save, to earn, to budget, etc)

The Goals are:

• Who you wish to Be
• What you wish to Do
• What you wish to Have

 …and there's a cost attached to these and so we then express them in financial terms.

The Goals are not just the tangible things, but also about how you want your life to unfold. What does your life have to look like to feel that you are meeting your core values? These are revealed when we talk about your Financial Road Map and The Three Questions, for example. In this way, your financial plan helps you to make financial choices that support the life you want in a profound way.

Your Financial Road Map becomes a high level picture of the life you want, which we look at again regularly and update. Your plan has the action steps needed to ensure your Financial Road Map happens in real life.

So, we are looking at the resources available, whether they need enhancing and what you need to do with them to move you towards your goals.

There will be various time frames attached to these goals, a rate of return needed, obstacles (real and perceived) to be navigated and risks to allow for. Our planning relationship will address these.

We are also looking to see if the return needed to achieve the goal is acceptable for the risk you’re prepared to take and if there are obstacles which cannot be removed. In either of these cases, we may be looking at alternate scenarios and compromises to either achieve goals as set by you or change them to something else that’s acceptable in collaboration with you.

We have found that a plan which is clear to understand, flexible and easy to carry out to achieve your goals for your reasons includes:

• Clear, written strategies and recommendations in plain English - ideally including a one page summary per strategy with diagrams as well as the written word.
• A clear written implementation plan - Staying on Track Tactics (STT’s): two or three pages of action steps of who does what and by when in sequence at our progress meetings.
• Dynamic lifetime cash flow and scenario modelling at planning meetings as appropriate.
• Open discussion, communication and collaboration between you as the clients and me as the planner. 

50% TAX is temporary

At the Institute of Director's Annual Convention on 11 May, George Osborne, said "high personal taxes can be as damaging to growth as high corporate taxes, so I am clear that the 50 pence tax rate would do lasting damage to our economy if it were to become permanent, as some suggest. It should be a temporary measure".

I wonder length of time temporary is?

BE A STUDENT of inevitability

Ask yourself often, "In all honesty, if I keep up my current daily practices, where will they lead me in 10 years?"

I work with people who perhaps want to learn a different set of practices so they arrive at a well designed future rather than an un-designed future.

If you're sat in a rowing boat without a motor and no oars 200 feet from the drop on Niagra Falls, we would call that inevitable. My role is to spot people drifting well upstream so they can make alternate choices while options are still available.

Ask, "What or who's plan am I following? Is it mine or the one someone else gave me? Is it working? Do I need a better plan? What do I need to work on that is not working now? Do I have a good plan, but need to take action on it?"

AUTO-ENROLMENT requirements

The Pensions Regulator has issued the first of its documents to assist employers complying with the automatic enrolment requirements – which something that will present a significant impact on all employers and employees.

The Pensions Regulator is writing to the UK's biggest companies, alerting them to their new pension duties, which are introduced on a gradual or 'staged' basis according to employer size. The regulator is providing a 5-point checklist alongside with the notification letters, plus further information on its website.

In the next 6 months, nearly 600 of the largest organisations employing about a third of the UK workforce (around 10m employees) will have received letters marking 18 months to their particular duty (i.e automatic enrolment) date. In due course, every employer in the UK will have received at least two letters as they approach their duty date.

The Regulator is also now providing the following information:

• A summary of duties - a five-page overview of the new duties for employers.
• Know your date – employers can check their indicative staging date for the new duties.
• Detailed guidance - This covers all aspects of workplace pension reform legislation, and is designed to be suitable for large employers with experience of providing pensions, advisers and intermediaries.
• Software guidance - This guidance is designed to help payroll software developers implement changes to their products, better enabling them to support employers.

The following further material will be issued by the regulator later this year:

• Interactive tools – these online tools have been designed specifically to help smaller employers without previous engagement with pensions to understand the new duties. This will include a tool enabling employers to look up their indicative staging date by inputting their PAYE reference, as well as a tool to calculate pension contributions.
• Trustee checklist – aimed at trustees of existing schemes, this will set out some of the issues that should be taken into account when existing pension schemes are considered for automatic enrolment.

The issuing of this guidance prompt to employers to ensure that they will be ready to meet their automatic enrolment requirement, which will take effect between October 2012 and September 2016, depending on the size of employer.

EASY TO, easy not to...

...this is the nub of whether we succeed or not. What is success? Having a design for your life and then pulling that off. It revolves around decisions and actions which are often both easy to do and easy not to do. It's a push-shove match - which will win? The discipline of doing the thing or the neglect of not? Making that call is easy to do; it's also easy not to do; walking around the block is easy to do; it's also easy not to do; eating five fruits a day is easy to do; it's also easy not to do. Easy to, easy not to. If you don't make that call today, will there be a noticeable difference 24 hours later? The answer is: no. If you don't exercise today, will there be a difference 24 hours later? The answer is: of course not. But compounded over time? The difference is huge. So, the difference between success and failure are the daily decisions we make - we either choose the disciplines repeated every day, or we make errors in judgement repeated every day. The first can be uncomfortable - today, but lead to comfort tomorrow. The second can be comfortable today - but lead to discomfort tomorrow. But 24 hours after they're made - you can't tell the difference; over time, the difference is obvious and in some cases, irreversible.

Easy to...easy not to.