The brief
Sam Whybrow biography
Sam has multiple qualifications, including the CERTIFIED FINANCIAL PLANNERTM designation, and is a Registered Life Planner. He works at multi-award winning Cervello Financial Planning in Essex.
Sam is passionate about financial life planning and how people connect with money, their life and others to make money work for them, not the other way round. Planning is first and foremost about his clients, their future and then their money, which he believes delivers better outcomes.
Sam is also intent on combining digital solutions with the best parts of financial life planning to further enhance his clients’ financial planning experience.
Andrea, aged 54, highly successful and earning a six-figure salary in London, was disillusioned with her high-pressured job. She sought a better work/life balance so that she could devote time to pursuing her own passions. She wanted to split her time between London, where she lives, and being with her son and grandchild who live some miles away.
She and her husband were also divorcing, but wanted to do so amicably. Andrea and her husband had accumulated assets over the years and had repaid their mortgage. However, she was unsure about her financial capacity to change her life so dramatically, especially as she was approaching retirement age. She was worried about both her immediate financial position and the effect these changes would have on her overall financial position.
The planning
Andrea had major decisions to make. It was vital that I understood Andrea as a person before we started talking about financials, and we therefore took time to establish how she had achieved her present position; what vision she had for the future; what her past experiences with money were; what was important to her; and what expectations she had.
I was also interested to know what her husband’s expectations were for the divorce settlement. This insight would help me to assist Andrea and her solicitor to resolve the divorce as amicably as possible and make mutually acceptable financial decisions. The aim was to put a strategy in place that reflected what Andrea wanted from her life. I therefore needed to know what she expected from her money.
The initial conversations I had with Andrea focused on helping her to be positive so she believed that her goals were achievable. The obstacles would be discussed later, but at that point it was important that Andrea did not limit her beliefs before the divorce was finalised, or before she knew what possibilities were available to her.
Andrea placed significant importance on ensuring that her “capital lasted as long as she did”, especially as she was still some way from her retirement age (65). However, she didn’t want to fear using some of her capital immediately to help fund her new life. In her words: “Why live life tomorrow, when you can live it today?”
She was keen to split her time between “her London life” and her “life as a mother and grandmother”. However, she was conscious that this could affect her earnings potential, especially if she spent considerable time away from London, which was where her new consultancy business would have the best opportunity to thrive. Her consultancy earnings were an important part of the financial transition between full-time employment, semi-retirement and retirement. In-between our meetings and conversations, I established that Andrea had assets of some £250,000 in ISAs, £300,000 in shares and unit trusts, £650,000 in pensions and £350,000 in bank deposits. The jointly owned, unencumbered UK property had already been sold for £1,650,000 and both parties had bought their own property with an equal share of the proceeds. Andrea had retained some £75,000 in bank deposits after buying a property for £750,000. The residual amount was earmarked for home improvements. Her husband had independent assets of some £200,000 in ISAs, a business valued at some £500,000, a deferred final salary pension with a cash equivalent transfer value of £450,000 and bank deposits of £175,000. Her husband was keen to retain his business and final salary pension whereas Andrea was keen to have flexibility of capital and income.
Identifying expenditure
Andrea completed an expenditure questionnaire which identified that she was spending all of her income. I also asked her to imagine what expenditure might look like for her new life. The questionnaire showed that her expenditure dramatically reduced from some £100,000+ pa to some £40,000 pa. We agreed to cease pension contributions for the time being, and for ISAs to be funded from her share portfolio rather than her own savings.
From my understanding of her husband’s position I was confident that Andrea had sufficient assets, based on an initial equal split of matrimonial assets, to help her transition from her highly pressured life to the one that she dreamt of. It was also apparent that Andrea could achieve her required amount of income, a flexible lifestyle and longer-term security, all while she built a new business and transitioned into retirement.
It was important that Andrea visualise this too, especially as so much of her life was susceptible to change. We therefore agreed that I would create an overview of her potential future financial position (cashflow plan) based on various desired outcomes. This would help her to plan for tomorrow, today, while incorporating provision for obstacles and unknowns.
We arranged to meet every two weeks over an initial two-month period to help us/Andrea to maintain momentum, allow both parties time for reflection, build Andrea’s confidence and adjust our planning accordingly.
During that eight-week period we built various financial plans using many assumptions to stress test her financial position in various divorce scenarios. Andrea was subsequently fully informed and knowledgeable about her current and future financial position and we were also able to liaise with her solicitor so that the divorce could be settled at the earliest opportunity.
Shortly after our work together, Andrea created an amicable financial agreement with her husband.
Over the course of a few months, we managed to help Andrea move from a state of flux to a life and financial position that had greater clarity, focus, structure and also flexibility.
What happened next
She has so far been delighted by the planning we have put in place for her and has appreciated that we have acted in her best interests at all times. She is surprised by the relationship we have built and by how we worked together to achieve her goals. Her finances now have meaning and have given her life purpose.
For more information about financial planning and choosing a financial planner, visit our Wayfinder website.
Takeaways
1. Andrea resigned from employment, confident in the future. She sees her son more, enjoys a less stressful life and has more than enough income to satisfy her needs.
2. We implemented several recommendations that have improved her position and met her needs. We regularly meet to ensure she is fully abreast of her financial position and that every financial decision she/we make is meaningful.
3. So far Andrea has not needed to access her pension as her consultancy business is thriving.
4. Her holiday home is being let and, as expected, the income varies but is mainly consistent. She is considering stopping the holiday let, such is her overall income position. She is continually making home improvements from the money we set aside for her.
This article was originally published in the Q3 2017 print edition of The Review. The print edition is available to all members who opt in to receive it, except student members. All eligible members who would like to receive future editions in the post should log in to MyCISI, click on My Account/Communications and set their preference to 'Yes'.