Wealth planning – a short guide
Whilst money does not guarantee happiness, it is a resource that can provide the peace of mind and opportunities needed to build a fuller and more fulfilling life. Although wealth planning sounds grand, it’s simply a phrase describing the sensible management of your money. In essence, a wealth planner’s role is to help you enjoy your wealth, as opposed to worrying about managing it.
In today’s article, we offer valuable insights into wealth planning. We will walk you through the planning process, the role of a wealth planner, and, lastly, a real-life example of the benefits of working with one.
Related reading
- At what net worth do I need a wealth manager?
- Seven ways to preserve your wealth, assets & property
- A guide to wealth management
What is wealth planning, and what does it entail?
Wealth planning is the process of managing an individual’s or family’s financial resources to achieve long-term goals. Furthermore, wealth planning helps protect assets and provides financial stability for future generations.
It involves a holistic approach that covers:
- Investment management
- Tax planning
- Retirement planning
- Estate planning
To summarise, wealth planning helps individuals build, preserve, and transfer wealth effectively. Next, let’s take a look at the role of a wealth planner.
What is a wealth planner and what do they do?
A wealth planner is a financial professional who helps individuals and families manage and grow their financial resources. Wealth planners work closely with their clients to understand their financial goals, providing expert advice to protect and build wealth over time.
Furthermore, they offer ongoing support, adjusting plans as circumstances change. This approach ensures long-term financial stability and peace of mind.
Do I need to work with one to manage my wealth?
No, you don’t necessarily need a wealth planner. Many individuals and families manage their finances on their own.
However, think of a wealth planner as a personal trainer for your finances. Just as a personal trainer helps you improve your fitness and achieve your health goals faster, a wealth planner helps you:
- Work through complex decisions
- Build wealth in a tax-efficient way
- Avoid costly mistakes
- Improve your financial fitness
- Offer expert guidance and years of experience
What are the benefits of working with one?
The long-term advantages of a structured wealth plan are numerous:
- Financial security
- Reduce and avoid taxes
- Building wealth
- Legacy planning
- Financial peace of mind
- Investment risk management
- Tailored investment plans
- Planning for retirement
- Reducing debt
- Financial independence
Wealth planning – a real-life example
By now, you will have a solid understanding of wealth planning, the process, and the benefits of working with an experienced financial professional.
Now, let’s explore a real-life scenario further highlighting the role of a wealth planner.
1: Where are you now?
Imagine trying to get to a destination without knowing your starting point or where you are now. Starting off, you wouldn’t know whether to go straight ahead, turn right, left or do a complete u-turn!
Your wealth planner will help you determine where you are now with a financial review. This will involve gathering information about your current finances and doing a financial health check.
At the end of this, you’ll know which parts of your finances are strong, which need fine-tuning and which parts need close attention.
2: Where do you want to be?
This is the bit most people struggle with – establishing what they want and when they want it. Most would like a comfortable retirement, a mortgage-free home, the ability to fund their children’s education if necessary and to leave their family financially secure on their death.
But what do you want?
A wealth planner will help you determine what’s most important and prioritise those wants, turning them into goals.
Goals are only dreams unless they are SMART.
If you don’t know, SMART stands for specific, measurable, achievable, relevant and time-bound.
A smart goal could look something like this: “I’d like to pay off my mortgage by the time I am 60. This is because I’d like to spend more time playing golf and working less.”
Related reading: Setting financial goals
3: What are the possible ways of getting there?
Now that you know your starting point and destination, you can start planning your route.
Let’s say in the “Where you want to be” section, you’ve decided that you’d like an income of £3,500 per month net of tax when you retire at your chosen retirement age.
Do you know what you need to do to achieve that? Probably put some money into your pension plan, but how much?
Just like a mortgage broker would know how much you’d need to pay per month for a given mortgage, interest rate and term, your wealth planner would have tools to help them calculate how much you’d need to pay into a pension to achieve your desired retirement income.
This would consider the risk you were willing to take, the effects of inflation, your affordability and other matters such as tax.
4: Let’s get started!
You now have your starting point, your destination and a route map with directions to get you there.
What are you waiting for?
All the planning in the world is useless unless you implement the plan and get started!
This is another significant stumbling block for many people and where having a wealth planner in your corner might make a difference. This is because they will make you do it!
Wealth planning – factors to consider
If this article has given you food for thought, here are some things to think about when considering your own wealth planning needs:
- Evaluate your financial knowledge before deciding whether to manage your wealth on your own or by seeking professional help
- Consider the complexity of your financial situation and whether a wealth planner’s expertise will help to make tough decisions
- Assess your comfort with making financial decisions independently versus relying on expert guidance
- Understand the long-term value of professional support in achieving financial stability and goals
