Financial Planning with a Purpose

Financial Planning with a Purpose

‘Beauty with a purpose’ has a melodic ring and led me to think about ‘Financial Planning with a purpose’. Understanding and defining your life goals and financial objectives is crucial to successful financial planning. What is that you want from your wealth and investments? I suggest that before consulting a financial adviser you should give some thought to how your wealth is aligned with your life goals.

In the business world setting SMART goals has become fairly commonplace. SMART is the acronym for specific, measurable, achievable, realistic and time bound. To set meaningful goals for your financial plans you are more than likely going to reflect on your values and what is important to you. The risk of not basing your financial plans on a clear purpose is that your decision making is influenced by emotions such as fear and greed.

I was delighted to read that our regulator, the Financial Conduct Authority (FCA) is paying attention to behavioral finance.  It seems that due to behavioral traits the consumers’ choice in financial services products are prone to error. An example of this would be the scandal of the mis-sold Payment Protection Insurance – since January 2011 approx £9.6bn compensation has been paid.

In addition to the complexities associated with some financial products there are also a number of behavioral factors which affect clients’ choices. These include having to make decisions that involve a trade-off between the present and future. We see this where lifestyle may need to be sacrificed now to provide a secure retirement in the future, or in the case of inheritance tax planning where control over capital is forfeited to benefit from a tax saving on later death. Clients’ judgment can be impaired when it comes to making decisions that involve risk-taking and uncertainty.

Often people rely on their emotions and make decisions driven by anxiety and fear of losses instead of evaluating the costs and benefits. A financial adviser can provide objective advice and help ensure decisions are appropriate for your circumstances.

For a young lady and gentleman a dream will come true along with a year of fundraising for ‘Beauty with a purpose’. Alas, I cannot promise you the glitz and glamour associated with beauty titles, but I can say that the peace of mind and confidence that comes with sensible, goal based financial planning will endure for many years to come.

[Jenny Ives, Western Morning News, 13 June 2013]


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Matthew Clark