Forget about financial products, this time it’s personal

Lifestyle financial planning is about taking stock of your personal goals and how to reach them


‘Accumulating assets is not a real objective,” says Sandra Rockett, head of financial planning with Davy Private Clients. “Maintaining your lifestyle in retirement, ensuring your kids can go to college: these are real objectives.”

How best to organise your finances in order to achieve your own personal goals is the crux of lifestyle financial planning.

Rather than taking financial products as a starting point, a lifestyle financial plan focuses on you: where your finances are now, what you want to achieve and, crucially, what you need to do to get there.

“Our job is to tease out from the client what they want to achieve and understand where they currently are in terms of their employment situation, assets and debts,” says Rockett.

“We take this away and come up with a plan. It’s a guide for the client to move from where they are to where they want to get to in the most efficient way.”

Mel Mimnagh, senior manager at Danske Bank, says everyone’s circumstances will be different. “Some people have children, some are married, some might need to make provision for people with special needs. The principles are the same but everyone’s plan will be slightly different.”

Model future
Advisers can use tools to create a model of your financial future based on what you’re currently doing and advise you on how to get where you want to be.

“Even if you can’t fully implement it, half the battle is knowing where you stand,” says Mimnagh.

“The major benefit is that you will have much greater financial security. Short-term, in the case of death or loss of income, you are protected. Long-term, it’s about the replacement of income in retirement.”

Lifestyle financial planning is a long-term, high-level approach that reflects a sea change in how people need to think about money, says Rockett. “This is the first generation who won’t be able to rely on companies for pensions. This is the first generation who can’t spend everything they earn and need the discipline to set money aside for retirement.”

As a result, people need to start planning their finances earlier, with the aim of creating wealth.

Traditionally, people seek advice at the end of their career when the focus is on protecting the assets they have accumulated. “Everyone needs advice because you’re going to have to be reliant on yourself. It’s a big societal change.”

She says there is also pressure within the industry to provide contextualised advice. “Regulators are pushing us to understand clients’ circumstances before we give advice. “Products are tools we can use but our advice needs to be at a much higher level.”

Mimnagh says a lifestyle financial plan will always be a work in progress. “It’s something you should always be monitoring. It’s a wide area covering risks, managing investments and pensions. You change, your circumstances change and the world changes. You should review it at least every year.”

No sales pitch
He says that, unlike the product-focused approach, lifestyle planning does not hinge on making a sale there and then. “Financial planning decisions are not always about taking out a new product. For example, people are making decisions not to cover themselves (via health insurance) and are relying on the State.”

Rockett says having a deeper relationship with the client means in some cases challenging their decisions.

“Part of the plan is to make sure you’re protected: from yourself, from making decisions out of context and from the markets. As an industry, we feel a greater responsibility. We are almost the conscience of the individual.”