Having been a judge of the Financial Planner of the Year awards for more than 10 years and having read every single entry in that time, I think I’ve seen it all. Replying to a case study like those set each year is quite an undertaking and I can appreciate that it often takes many, many hours of hard work. To find you haven’t even been shortlisted to make the final two in each category can be frustrating as you do not even know where you went astray. So this month’s article is here to help you.
In a nutshell the answer is to create a mini plan.
What would you put in a full financial plan? How would you structure it? Use this approach and go through the same steps to create your mini version for the case study. Remember the six-step financial planning process, as outlined in Box 1? Try following that to ensure you have all bases covered.
Objectives should be clearly stated and quantified. Ensure they are written in today’s terms, for example so that the buying power is maintained.
All relevant assumptions should be stated and properly reasoned. There may be some data missing or questions you ideally like to ask the client, but obviously in our hypothetical setting, you can not. If that is the case simply state a reasonable assumption and move on.
It is not enough to state a figure for investment growth and just say, “I think it is reasonable”. Why do you think that? What data has led you to this conclusion? State it. Ensure you demonstrate your understanding of the relationship between inflation and cash, fixed interest and equity returns and that you take account of charges in your submission.
Longevity is a difficult discussion. For example, a 65-year-old male today would have an average life expectancy of 86.5, but planning for that means 22 per cent would still be alive at that time and would therefore run out of money. If you decide to extend (or reduce) the anticipated mortality age however, for example to 100, you need to justify why you are doing so.
Regarding data analysis, show your workings, otherwise the judges cannot see whether your recommendations are appropriate to the client’s situation. It is worth saying here that there is NO model answer and NO single right answer. There are, however, plenty of wrong answers if you do not evidence how you came to your recommendations. For example, if you just say “a family income benefit policy to pay £10,000pa for 20 years will meet your objectives, “the judges will be thinking, “Why FIB? Why 20 years? Why £10,000?” You must also take into account the client’s existing assets, so if they have (for example) a lump sum that could be used to meet some of their expenditure, take account of it.
Analysis
When you analyse the client’s assets, assess how suitable you think they are for the client moving forward. Look at the product types and underlying investments as well as the ownership of those assets.
Any figures used to analyse the client’s situation MUST come from the assumptions. All too often we see analysis using different projection assumptions to those stated in the assumptions section, so even though those that were not used may be perfectly reasoned, the actual assumptions used are not reasoned at all.
