Case Studies2018-10-10T17:50:31+00:00
CASE STUDIES

OUR SORT OF CLIENTS?

Words are cheap, time is not. Solomon’s is built around listening to our clients; it is not built to sell financial products. There is no easy way to get to know one another. It takes time. This is costly but deeply valuable. We only work with people who require proper financial planning. We are not suitable for people who simply want to set up “stuff”. A lot of what we do is rarely seen, which makes it harder for you to appreciate the value of what we do.

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NET WORTH ILLUMINATION

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WEALTH ACCUMULATION

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WEALTH PRESERVATION

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NET WORTH ILLUMINATION

John and Jane were in their early 40s with two young children. Our discussions revealed that they were relatively risk averse and wanted to maintain their lifestyle. They were concerned about their children’s education and wanted to send them to a local private secondary school, though they were concerned about the costs of having a large mortgage and school fees and wondered if they would be working so much to pay for both that they wouldn’t enjoy any family time. Upon further discussion they were concerned about their ability to maintain their work rate, which was of course providing their income.

Surplus Income

We reviewed their existing arrangements. They had good employer pensions, a £450,000 mortgage and school fees were estimated at £6,000 per child per term. Their combined income was over £250,000. We initially established a proper cashflow budget so that we could identify what income they required to support their lifestyle now and in the future. We identified the surplus income and once an emergency reserve was built, allocated it towards repayment of the mortgage. We also identified the risks to their lifestyle if there were alterations to their income (for whatever reason). This risk was then properly insured, we also got them to renew their Will, appointing guardians for their children and removing the Solicitor as the Executor.

Reduced Commitments

Scrolling forward to the present, the surplus income has now cleared their mortgage in full, many years earlier than planned. Surplus income has been directed to a reserve for school fees. It will be sufficient within 2 years. As a result:

  • before they are 50 they will have met their largest expenses
  • we could reduce their insurance cover
  • of the planning and radical change to their net worth, they reflected on their plans again, which resulted in Jane working part-time and John considering retiring earlier

The reduced commitments have meant that they are able to reconsider their careers so that they fit with their own family life.

Of course, there were other options open to John and Jane, but together we rejected those in favour of debt and stress reduction, which was suitable for them.

WEALTH ACCUMULATION

Jack and Mary run their own business. They have cleared off their mortgage and are enjoying their work. They have gathered a mixed bag of pension schemes and a few ISAs over the years and had been advised by their Accountant to make a pension payment in order to recover some tax relief. The business is well established within a competitive industry. Ultimately Jack and Mary want to enjoy the fruits of their labour and are unsure what income they need. They seem to have a good lifestyle now, but are concerned that this would need to be maintained.

Finding out about you

We began by establishing what lifestyle Jack and Mary currently have, identifying their passions, hobbies and general expenses. Their pension funds were relatively small for people in their fifties. On further questioning, it appeared that Jack and Mary were not terribly keen on pensions, in fact one of their old pensions had not grown much at all, and it was in a “low risk fund”. They explained that Jack’s father had died when he was 67 and had barely enjoyed his retirement and they believed that his pension had been a waste of money. Mary was concerned that Jack was working so hard that perhaps he too would go the same way.

Together we identified what they wanted from life and whether some of the things that they were planning to do in retirement, could be brought forward – they could. We reviewed their existing arrangements and reflected what their current strategy would achieve – not enough. We considered what sum would be needed to enable them to finish working in 5 years time, a sum large enough that together with their existing arrangements would provide enough to have the lifestyle they wanted. A fairly significant figure, so how to achieve this? We discussed various options including saving more and taking more investment risk – they could save more, but didn’t want to take more risk and given that they wanted this in 5 years time, we didn’t think this would have been wise. Jack explained that he wanted a large amount for the sale of the business and perhaps that could do the job, on paper it would – but the number may have been unrealistic.

Earlier than planned

We worked out what was actually needed after sale costs and taxes. A considerably lower amount. As a result Jack and Mary are doing some of the things they planned to do in retirement today. They are also saving more, into a portfolio that properly suits their plans and ability to cope with risk. They are also preparing the business for sale over the next 5 years, knowing the minimum that they need – far less than they actually thought. Knowing his required “number”, Jack does not need to push for every last penny of a deal and has a very high level of confidence in achieving his net sale price. We are reviewing progress and Mary has persuaded Jack to see his GP for a health check.

WEALTH PRESERVATION

Edward and Margaret are in their sixties. They were concerned that their money needs to last potentially for many years. They were particularly concerned about the impact of inflation which “always seems to be higher than the Government says it is”. Edward still enjoys his work but is now only working one day a week. They are both very busy people and joke at how they ever managed to find the time to be employed full-time. They have adult children and a couple of grandchildren. They find inheritance tax a very unpleasant tax given how hard they have worked and don’t want HMRC to be their largest beneficiary.

Looking to the future

We discussed the things that they want to do with their time, this included a fair amount of travelling but also some time spent with their family. They were concerned about the possible impact of poor health and in particular have personal experience of a parent with dementia. They recognised this as a potentially long-term condition and if care is required, a costly one. We mapped out their plans, which included their views about inflation. We ran some worst case scenarios – care fees for an extended period. We reviewed their portfolio and calculated the investment risk within it, higher than they were comfortable with. We modelled the impact of a stockmarket crash and a long, slow recovery. We assessed what returns they actually required in order to achieve their lifestyle income. We were able to offer a range of scenarios that we could discuss and consider together. This then led to the realisation that they didn’t need to take as much risk as they were currently doing. We could make their investment more secure in a portfolio that they understood and made use of tax allowances.

Asset Management

We also considered ways to plan for and reduce the potential inheritance tax, but suggested that perhaps they could begin gifting assets to their children, so that they could see the benefits of this today. They took this further and we discussed the charity work in which they have an active interest and how they might support this more effectively. In essence we identified what they needed, planned with the worst in mind and still identified that there was a surplus that could be used constructively for the good of their family and their charitable interests.

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Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

info@solomonsifa.co.uk    Call – 020 8542 8084

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GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

info@solomonsifa.co.uk    Call – 020 8542 8084

SOLOMON’S FINANCIAL PLANNING APP

Our free powerful new Finance & Tax app.
To get started download and use password – solomons

   

WHAT WE’RE ALL ABOUT

If you would like a no-nonsense one page document explaining what financial planning is all about please enter your email here.