I recently read a fascinating book a client recommended to me. Called Do No Harm, it is written by leading brain surgeon Henry Marsh. The book is both a memoir of his medical life and an exploration of what it is like to have to make daily decisions on who to treat and who is beyond hope; of when to cut and when to leave alone.
It has helped me deal with one of the things I have found most difficult about being an IFA: that there is not always a right answer.
When a client is paying money for a professional opinion, it seems a cop-out to sit on the fence and say something like “I cannot clearly identify a best option for you”.
Sometimes, however, that is the only honest thing there is to say.
I am in no way trying to equate the decisions I take day-to-day with those of a brain surgeon. Yes, left unchecked, a bad call on an investment or pension could eventually ruin a client’s financial life. However, if you spot something going wrong as an adviser, there is usually a second chance to change tack and undo, or at least mitigate, the original choice.
Where I see a parallel between financial advice and the work of a surgeon is in understanding the world does not operate in black and white. There are numerous shades of grey (and in his case, shades of grey matter).
Sometimes it is very difficult for a brain surgeon to know whether a treatment will do more harm than good. Sometime the risks of cutting into the brain to remove a tumour might not justify the extra year or two of life successful surgery might grant. Decisions are finely balanced and there is often no “right answer” in how to deal with a case.
A colleague and I were discussing some clients last week. This couple are in a very strong financial position. They both have good jobs and save hard. They are well pensioned, with a multiplicity of historic DB benefits and strong DC provision. Both are likely to be caught by the pension lifetime allowance if it is reduced to £1m as planned. We have been asked to advise on the optimum pension strategy and on potential transfers from the historic DB arrangements.
There are lots of factors in the mix. There are political uncertainties and risk of yet more legislative change. There is a wide possible range of investment returns. There is scheme solvency and the financial strength of the employer covenant to consider – in multiple schemes.
Maybe an option is to cash in some DB benefits early and take the actuarial reduction to lower the LTA value? Maybe that then allows ongoing employer funding of current arrangements? But the latest transfer values and critical yield calculations pull in a different direction.
The upshot of our discussions was that there is no clear right answer – just some options which have greater merits than others. While there may be no perfect answer there are still some good ones. And that is still an opinion worth paying for.
Do no harm is a great mantra for brain surgeons to aspire to. It is no bad philosophy for IFAs too.
Stephen Womack is chartered financial planner with David Williams IFA