Whether you’re 20 years away from retiring, ready to retire, or in retirement, a financial planner will follow a robust process, through which they can get to know you, find out about your hopes and dreams for the future and identify how near or far you are from achieving them.

This process is personal to you and will include a deep understanding of:

• your goals and objectives
• your personal preferences
• your current situation and lifestyle
• your investment timeframe
• how much risk you’re prepared, and can afford, to take with your money
• your tax situation

At Amber River, we call this process Life Landscaping®.

The first step is to understand what you want to achieve. Your goals are the foundation of your financial plan. Some might be relatively easy to achieve, while others are more ambitious.

To understand how achievable your goals are, we follow these steps:  

By going through this process and creating a financial plan, you will be able to see if your goals are realistic or if you need to make some adjustments. Your advisor might also use software, like cashflow modelling, to help visualise the years ahead and model the impact of predicted and unpredicted events.  

Now that you’ve planned for your best-case scenario, it makes sense to include preparations for the worst. Ill-health, redundancy and bereavement can derail a financial plan, creating additional stress at an extremely emotional and difficult time. 

No one likes to think about illness or death, but you can prevent significant hardship further down the line for your family by taking a few simple steps.

For instance, your financial planner may advise you to:

• put aside an emergency fund of at least three to six months’ essential expenses
• insure your income so that you can maintain your lifestyle even if you‘re hit by an illness that prevents you from working
• set up life insurance and critical illness cover, which provide a lump sum in the event of death or serious illness. This is essential if other people are relying on your income.

Good financial planning will help you organise your finances, so you’re not paying tax unnecessarily. 

Some of the tax-efficient recommendations your financial planner may suggest are:

• Maximising your annual Individual Savings Account (ISA) allowance, as returns are tax free. Stocks and Shares ISAs can efficiently use the tax advantages to produce both income and capital growth. 
• Increasing your pension contribution. Not only do you receive tax relief on your contributions, but any growth or income generated within the fund is also tax-free. 25% of the fund can be withdrawn free of tax at 55, while the remainder can be drawn flexibly and taxed at your marginal rate. 
• Make use of your capital gains exemptions. You can realise gains of up to £12,300 (2020/2021) without paying any capital gains tax, for example, moving savings from a taxable account, like a General Investment Account (GIA) into an ISA or selling some of your investments in a GIA that have grown in value

Once the basics of tax planning are in hand, your financial planner may advise you on specialist investment schemes such as Enterprise Investment Schemes (EIS) and Venture Capital Trusts (VCT), which offer substantial tax benefits. However, they are very high-risk, so are generally only suitable for experienced investors who are willing and able to risk losing all the money they invest into these schemes.

Many people would love to leave an inheritance so that children or other close relatives are given a financial boost. By incorporating legacy planning into your overall financial plan, you can ensure that more of your money ends up in the hands of those you intended. There are a number of options your financial planner can discuss with you and help you to plan. These include:

• Making regular, affordable gifts to family members or charities. In many cases, these are immediately outside your estate for inheritance tax purposes
• Making larger, one-off gifts. These will typically remain in your estate, and therefore subject to inheritance tax for seven years
• Placing money in trust. This is a complex area, and while trust planning can save tax, it can also increase it. Legal advice is recommended
• Ensuring your Will is valid and up to date
• Gifting money to charity. Charitable bequests via a Will can result in a 10% IHT discount on your residual estate, providing at least 10% of your estate value is donated

A good financial planner knows your life is not a dress rehearsal. They will help you do the things you want to do now and put the mechanisms in place to achieve what you want in the future. Ultimately, the job of a financial planner is to help you have a better life, not just a better return on your investments.