Money and Mind II webinar on creating a financial plan

We recently launched our second Money and Mind report with a webinar hosted by Leigh Dunkley, Financial Wellbeing Lead at Schroders Personal Wealth (SPW). The webinar featured Katie Nutting, Chartered Personal Wealth Adviser at SPW, and financial commentator Jason Butler, who has 25 years’ experience as a financial adviser and is a Chartered Fellow of both the Chartered Institute for Securities & Investment and the Personal Finance Society.

The content of the webinar was wide ranging. In this article, we consider the discussion about creating a financial plan.

The Report surveyed 2,000 UK adults across a broad range of age groups, regions and levels of wealth. We asked these respondents how they felt about many financial areas and scored their collective answers, with 25 a maximum score.

The score for protecting against the unexpected was 8 out of 25. This appeared drastically low compared to other categories, but it’s a big improvement on the 2020 score of just 3 out of 25. Similarly, the score for planning for the future this year was 10 out of 25, compared to just 5 out of 25 in 2020. Despite the improvement in both scores, which could be due to the impact of COVID-19, they indicate a clear and widespread gap in longer term financial provision.

Work out your real financial needs

At SPW, we believe in the benefit of a good financial plan, which can help you prepare for unexpected events and for the future. It could also improve your financial wellbeing. When it comes to financial wellbeing, Jason Butler believes you first need to consider what your real needs are. He said the big question is whether or not you can rely on your finances to meet those needs.

‘We’re going through a real squeeze in living conditions at the moment in the UK,’ said Jason. ‘Everything is costing more, whether it’s tradesmen or energy bills. This backdrop can influence your optimism, even if you have enough money to meet your needs.’

Money troubles versus money worries

In this regard, Jason distinguishes between money troubles and money worries. Money troubles concern financial problems you might have right now. But money worries are concerned with what could happen rather than what is happening. ‘It’s an anxiety,’ said Jason.

Jason added that, in many cases, external situations are not the problem, but rather our assessment of these situations. In his view, we need to distinguish between what we can’t control and what we can control. So we can’t control the economy, the stock market and property prices. But we can control non-essential spending, what we do with our time and how we interpret events. In this sense, you could improve your wellbeing by altering how you interpret events over which you have no control and choosing to focus on those you can control.

Jason says we need to work out what our real needs are from an emotional point of view. ‘When we think about money, we’re really thinking about two things: the security it can give us and the sense of control,’ he said.

Regarding safety measures, Jason said you can start by focusing on your present, which means getting organised. ‘You need to know what money is coming in and going out,’ he said. ‘You need to sort out your paperwork and be on top of it. Once you’ve got that sorted, then you can think about improving your future.’

He added that people have milestones rather than financial goals. And he believes that what matters is whether or not you are on track or going in the right direction. ‘Ask yourself where you’re heading. Ask yourself: “What does ‘good’ look like?” Getting a plan, where you’ve got clarity on your values, milestones and priorities, comes from working with a good financial planner.’

We’re happier with a financial plan

‘When we’ve got a plan and are working with a financial planner, then research shows we are happier and more empowered and feel more in control of our situation,’ Jason continued. ‘We’re controlling what we can control, not what we can’t.’

Katie Nutting’s view chimes with Jason’s. ‘Try to give yourself a plan to understand where you want to be, because you’re otherwise fumbling along without a clear path,’ she said.

Katie creates a financial plan for every client she works with, which shows the impact financial advice could make on their life. ‘I look at your current situation, taking into account income, expenditure, assets and liabilities. We run this forward to age 100 and say: this is what it looks like for you. Then it’s about understanding your dreams, aspirations and what you want your financial future to look like. It could be that you want to retire at 60, take cruises around the world or help out children.’

Katie says she then shows you how you could move from the starting point to the end point. ‘We keep reviewing this along the line, because your objectives and aspirations change,’ she added.

When it comes to creating a financial plans, Katie said typical questions she gets asked include:

• Can I afford to retire?

• Can I afford another child?

• Can I stop my income for a year to start my own business and what impact would this have?

Prepare for emergencies

But Katie says it’s not all about the future, as you also need to prepare for emergencies. But she adds that many people find planning for the unexpected perplexing and most individuals don’t really know where to start when planning for emergencies. ‘Many people don’t know how to categorise what they think an emergency would be, so they don’t really know what to plan for,’ she said.

As a result, Katie said she wasn’t surprised our Report’s score for protecting against the unexpected was so low. ‘We always recommend you hold an emergency cash fund,’ she said. ‘But very few people know how much that should be.’

Katie added that people’s ideas of an emergency vary and that the amount they want to put aside for the unexpected can also vary widely. ‘Some people are comfortable having £2,000 for emergencies while others want a six-figure sum.’ Meanwhile, Jason pointed out: ‘If everyone had at least three months of their core living costs in an emergency fund, imagine how much their worries would go and how much more in control they would feel.’

Mental health linked to financial circumstances

Leigh Dunkley added that a core detail to emerge from the Report was how intrinsically linked our mental health is to our money and our finances. She said: ‘Reducing stress and anxiety by putting in place some practical steps, such as having an emergency fund, can go a long way.’

For Katie, a good financial plan is about options. ‘My aim is to make sure my children have the best I can give them. We can go to CBeebies Land or Warwick Castle without needing to think about it. I want to have those options without having to worry.’

SPW’s service

Katie added that initial consultations at SPW are always free. She said that, if you already know your income, expenditure, assets and liabilities, and you know what you’re trying to work towards, then you could get a lot from that first consultation. Katie said we could then start to think about where you want to get to and consider looking at the level of investment risk that’s suitable for you. And we could look at your current investments and consider whether you could save into different portfolios. She added: ‘It’s only at the point when we look at the report, say we could help you and agree to move forward that any costs are incurred.’

Katie pointed out that, at SPW, our pricing includes a typical initial set-up fee of 1.75% and a typical annual ongoing advice charge of 0.65% as well as separate investment and product charges. Your financial plan would be included in these fees.

The full Schroders Personal Wealth Money and Mind Report II is available for download from our website.