The Case of ‘Too Much Risk’

Mr and Mrs ‘Sold Up’ had recently sold their business having worked hard for 30+ years. The couple were aged 60 and had no children to whom they could pass on their hard earned wealth. Mr ‘Sold Up’s’ primary concern was to ensure a high return on his capital.

Mr and Mrs ‘Sold Up’ had met with two financial advisers with a view to investing their capital. Each of the advisers had followed FSA guidelines and put forward their recommendations based on the ‘risk/reward’ profile they had identified for the client. As former business owners both Mr and Mrs ‘Sold Up’ had informed these advisers that they understood that “to accumulate, you have to speculate!”

To satisfy Mr ‘Sold Up’s’ requirement for a high return both Advisers had recommended a fairly adventurous investment portfolio which matched their average to above average risk profile. Both portfolios suggested a high proportion of monies to be invested in equities and other volatile investments in an effort to secure a high return over the longer term.

However, before investing their money Mr and Mrs ‘Sold Up’ were advised by a friend to speak with one of our Lifestyle Financial Planner’s in order to establish just how hard their capital needed to work in order to satisfy their lifestyle objectives.

Firstly, our Lifestyle Financial Planner’s helped Mr and Mrs ‘Sold Up’ identify the cost of their required lifestyle over the various periods of their lives, allowing for inflation and the possible need for long-term care.

Our Lifestyle Financial Planner then helped Mr and Mrs Sold Up to consider and include into their planning certain financial goals and objectives that would make their retirement more fulfilling and meaningful.

Then our Lifestyle Financial Planner’s ‘crunched their Number.’

With a thorough understanding of his clients, using sophisticated financial planning software and financial modelling techniques, our Lifestyle Financial Planner was able to demonstrate that in order to prevent ever running out of money Mr and Mrs ‘Sold Up’ only needed to achieve a real rate of return on their money of just 0.5% above inflation. Our Lifestyle Financial Planner helped Mr and Mrs ‘Sold Up’ understand their ‘Number’ – the amount of money they needed to keep living their life the way they wanted.

With this knowledge, he helped them understand that the last thing they needed at this stage of their life was risk; that what they in fact needed was a lower return with much less risk; a tax efficient portfolio which would give them the peace of mind they needed to enjoy their retirement – without constantly worrying about world stockmarkets.

With recent volatility of equity and property markets Mr and Mrs ‘Sold Up’ avoided the inevitable loss on capital that would have ensued had they invested with the other advisers without knowing and understanding their ‘Number’. Mr and Mrs ‘Sold Up’ continue to enjoy their retirement and our financial planners continue to meet with them on an annual basis, to monitor their investments, review their ‘Number’ and more often than not, discuss how much more they can afford to spend to further enjoy their retirement, free of worry.