View more on these topics

Tale of two clients

The contrasting fortunes of Caroline and Gerald illustrate the value of financial advice.

Is it the natural paranoia of an adviser to feel that their advice is not valued?

It is certain that in some quarters, financial advice is seen as an expensive luxury and the focus is on the cost rather than the benefits.

Those of us who believe passionately in advice and the value it has for clients need to continue to put advice at the forefront of discussions that could change our daily lives and those of our clients.

It was interesting for me to consider the financial profiles of two of my clients. Caroline has been a client since 2001. She has recently set up in business with Gerald. She referred Gerald to me as a potential client and I have seen him for the first time this year.

What struck me is that in terms of education, employment, age and family commitments, Caroline’s and Gerald’s situations are very similar. They live in houses with similar values, they have similar families and school fees commitments. But where they vary greatly is in terms of the pensions and investments they have.

I thought it would be interesting to compare and contrast the two situations. Caroline is 47, married with two children and earns £250,000. Her home is worth around £900,000 and she has a mortgage of £150,000. She has cash in the bank of £100,000.

Gerald is 45. He too earns £250,000, is married and has one son at boarding school. His house is worth £950,000 and he has a £250,000 mortgage. Gerald has £40,000 as a bank deposit.

Apart from the difference in cash in the bank, Caroline and Gerald’s equity in their properties, earnings, ages and school fees are similar. If you delve into their pensions and investments, the situation changes dramatically.

Caroline and Gerald both want to retire at 60 on net incomes of between £30,000 and £40,000. These figures may be revised upwards, as they are a big drop from the incomes they are earning at the moment, but their family commitments should be much diminished at the time of retirement.

Caroline has £80,000 in investments and £300,000 in pensions. By contrast, Gerald has no investments and a pension fund which is only £110,000. Gerald’s retirement planning is clearly inadequate and he does know this. What is interesting is that Caroline’s total of £380,000 in investments and pensions means she has £270,000 more in pensions and investments, excluding cash, than Gerald has. Why is this?

I have been very disciplined about annual reviews with Caroline since I took her on as a client in 2001. We have met methodically and regularly every year to review her portfolio, make the necessary changes and encourage her to save more for her future. She is self-employed. No one is going to help her if she does not help herself.

When I was talking to Gerald about the service that I provide for clients, I remarked to him that I think one of the most useful things that I do for clients is to make sure that I contact them on an annual basis and gently but persistently make sure they do what is needed each year. This is not a complex service to provide but it is one that is valued by many clients because they do not have a lot of time. They rely on us as their advisers to make sure that this disciplined approach is instilled into their financial planning.

Looking at the contrast in situations between Caroline and Gerald brought home to me what my services have done to improve Caroline’s situation. She could have ended up in a similar situation to Gerald, not quite sure what she should be doing or how much she should be saving to get the outcome that she wants.

If anyone doubts the value of advice, all they have to do is to look at these contrasting situations. In the immediate visible assets such as property, there is little difference in their circumstances. However, in the more subtle areas of pensions and investments, there is a huge difference. The reason for this is advice.

I know that Caroline is going to be able to achieve her retirement aims. I have caught Gerald in time but he is going to have to work very hard and he knows it.

Amanda Davidson is a director of Baigrie Davies.


New Star identifies optimum property holding

New Star have revealed that 87 per cent of IFAs think clients with moderate risk profiles should consider holding at least 5 per cent in direct commercial property. It says 40 per cent of respondents recommend a holding of more than 10 per cent and noone recommended 0 per cent weighting in international direct commercial […]

Protection moving online

The vast majority of protection policies are now written online, according to Royal Liver.Research by the firm among 567 advisers shows 90 per cent prefer internet-based applications. IFA market manager Andy Milburn says online facilities make sense for advisers writing protection alongside mortgages, as most mortgage business is conducted on the web.He says: “Providers offering […]

Basket work

Before selecting Ascentric, I scoured the market to see what was around but I was really waiting for clarity from the FSA as to its position on wraps.At the end of last year, the regulator no longer appeared to consider the use of an investment wrap as a compromise to one’s independence.I prefer the independent […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm