Your IndustryFeb 22 2018

Understanding client needs at different life stages

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Understanding client needs at different life stages

It is safe to assume clients in the same age group will have similar needs but within that, they may require some nuanced advice and certainly will have varying levels of wealth at their disposal.

In other words, advisers are required to understand the needs of clients at possibly quite different stages of their lives and have a range of knowledge when it comes to financial products.

Alison Treharne, chartered financial planner at Shore Financial Planning, acknowledges the majority of her clients are in their 60s and 70s and, as such, have accumulated wealth during their lifetimes.

Now the aim is to ensure it is maintained and to derive an income from it.

“This is vastly different from our younger clients who are still working and trying to grow their wealth,” she points out. 

As an adviser, it is important that we understand the reason the client has sought advice in the first instance but also ensure that we don’t limit our advice simply to the request prompted by the client.Jade Connolly

“As their objectives are different, their tax planning and investment management needs will also be different.

“Ensuring you understand their objectives, or even helping them to understand their objectives, is the crux of the matter.”

Ms Treharne makes the point that very often the client may be seeking financial advice without knowing what their own goals are. This is certainly where the adviser comes into their own.

Colin Dyer, 1825’s national advice manager, says one of the great skills of a planner is to be able to identify and agree the client’s needs, then review them regularly as their client moves through different chapters of their life.

“Planners will help their clients differentiate between key needs and wants,” he explains. “For example, a client is approaching retirement and has a key objective of leaving a long-term legacy to their family.

“Good advice will typically help them determine their essential and discretionary income needs in the first instance, and then they can think about the legacy as an important, but secondary, objective.”

Seeing into the future

This highlights another of the important jobs of the adviser, which is to help clients prioritise.

Jade Connolly, head of advice at Ascot Lloyd, suggests: “Clients often seek financial advice when they feel they need help and guidance.

“This could be when first seeking a mortgage, after receiving an inheritance or for others, when they consider retiring.”

While the client might have a financial goal in mind, they may not know how to achieve it.

Ms Connolly also points out the need for the adviser to go beyond what has been asked of them by the client.

She explains: “As an adviser, it is important that we understand the reason the client has sought advice in the first instance but also ensure that we don’t limit our advice simply to the request prompted by the client.

“It may be that a client has accumulated wealth but we advise they also need protection.”

She continues: “Or they may come to seek mortgage advice, but we recommend they use surplus income to make pension contributions.

“The role of the adviser, therefore, is to see beyond the immediate concern of the client and help the client build a life plan for the future.”

Simon Bashorun, financial planning team leader at Investec Wealth & Investment, agrees: “It is the adviser’s role to use his experience and expertise to help the client identify and prioritise his or her objectives at any point in time. 

“This starts with listening to what the client actually wants to achieve, but is also likely to involve introducing the client to considerations, issues and potential solutions that they had not taken into account.”

Life stages

So what might advisers expect to help younger clients with financially?

Ms Connolly notes that while every client is different, typically those who are younger require advice on debt and protection.

“They have young families and high outgoings, and therefore often seek advice in relation to a mortgage to purchase a first home, or protection via insurance to cover the worst eventualities,” she says.

The BlackRock Investor Pulse Survey was conducted in 2017 among 4,000 individuals, of whom 750 were millennials (defined in this case as 24-35 year olds).

It found 60 per cent of this age group view saving money as a financial priority, while paying off any debts is a priority for 34 per cent, and saving for a house deposit for 31 per cent.

Nick Hutton, head of the BlackRock UK retail sales team, explains: "The millennial generation is hamstrung by a range of immediate financial pressures, meaning their long-term financial goals are far down the priority list."

These priorities change with age though, as the research showed saving for retirement was the most common financial priority for those aged 55-64, then saving money was a priority for 39 per cent and finally, preserving wealth was a priority for 33 per cent in this age category.

“As clients get older and, generally speaking, their incomes increase there may be more opportunity for long-term savings,” acknowledges Oliver Smyth, financial adviser at Walker Crips Wealth Management.

At this stage of a person’s life, pension planning and long-term savings vehicles, such as stocks and shares Isas, move higher up the agenda, he notes.

“The savings vehicles are a means to an end, rather than an end in themselves, and helping clients understand this will enable them to start thinking about a realistic future,” adds Mr Smyth.

What about when clients reach middle age? 

For some, this could coincide with a time when their children leave home or when they are being paid more than at any other time during their career.

Mr Smyth points out that, often, this is when wealth and income tends to peak.

He urges: “At this point, careful tax planning can be extremely beneficial, for example, making the most out of available pension allowances to maximise available tax reliefs can be highly effective.”

In the latter years of a client’s life, converse to all advice previously, which is focused on the accumulation of wealth to provide for your family, inheritance tax may become an issue.Oliver Smyth

Finally, as clients head into retirement, the focus changes again. This time, there might be an emphasis on conserving some wealth to pass onto family members.

“In the latter years of a client’s life, converse to all advice previously, which is focused on the accumulation of wealth to provide for your family, inheritance tax may become an issue,” warns Mr Smyth.

When the conservation of assets for the next generation becomes a priority, he explains, the adviser will begin talking about the use of exemptions, gifting and trusts if appropriate.

Value of advice

For many clients, the process of getting financial advice will help them to understand what is important to them.

It should also cement in their minds why advice is worth paying for. For many, there is a perception that only those with a high net worth and who are in their 50s need the help of a financial adviser.

Frazer Wilson, senior consultant at Thomas Miller Investment, asserts that financial planners are ideally placed to guide both the inexperienced and experienced investor on how to keep their finances in order.

“Even a relatively small start can create a healthy habit, which becomes increasingly worthwhile as the pot grows and swings the pendulum away from a ‘why start in the first place?’ view,” he concludes.

eleanor.duncan@ft.com