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The long-term Investment of a Financial Planner

Please note the content herein in no way constitutes a solicitation of investment or financial advice. It should not be relied upon in making an investment or financial decision and is intended solely as an example for the reader. Readers should seek
appropriate guidance from their financial planner.

The long-term investment of a Financial Planner

When I first met Craig 10 years ago, he had just been made redundant from a job with an oil company he had held for 20 years, he was in his early 50s and had many concerns about what the future would bring. At that stage, he had never met a financial planner, and it would be fair to say he did not know what to expect.

The good news was that he had just secured a new contract position which would operate through his newly formed “one-man limited company”. The bad news was that he did not know anything about his options and how the new “company” would work, and secondly, he had no idea about the financial road on which he was travelling. Now that he had left the comfort of a long-term staff position, and the company pension, would he ever be able to retire?

At the outset, as financial planners, we did a number of things. At the heart was a financial plan – what was Craig trying to achieve? When would he like to be financially independent and at that time, how much money would he need on a monthly basis? The answer could be very different from today’s needs, bearing in mind the kids should be off his hands by then, and he would hopefully be mortgage free.

At this initial stage a thorough analysis of his current savings and investments were carried out. It was clear that the old defined benefit company pension scheme would be a cornerstone of his eventual retirement income, but also, it was far from being enough on its own. He had also acquired two ISAs along the way, but after suitable analysis, it was clear that neither were performing well, and he was being overcharged for the “privilege”. New homes were found for these, and a system of regular review put in place.

Another essential part of the initial consultation involved the use of Craig’s newly formed company. Strategies were put in place to keep the tax burden down. For example, making company paid pension contributions made perfect sense, as these were tax deductible for the company, yet the funds were extracted tax efficiently from the company into a pot in Craig’s personal name. In addition, beyond certain limits, it made no sense to pay out too much by way of personal income from the company, if it wasn’t needed. So instead a strategy of retaining excess profits in the company was employed, with the idea that these funds could be drawn down in later years, when income and tax rates should be lower. Not only that, but the retained funds were invested into a diversified portfolio in an offshore bond held in the company’s name, which made the funds work harder and produced a better return over the longer term.

An essential part of what any financial planner should do, is review. Clients’ circumstances change, as does legislation and economic conditions and it is essential to review thoroughly. So for Craig, we met at least once a year, with contact in between as required. At each review, amongst other things, we would update his financial plan to ensure he was still on track to achieve his objectives and adjust as required.

Now, 10 years later, Craig is happily retired. In recent months he has taken our advice on a number of things. For example, decisions had to be made about how best to extract the funds that had built up in the company over the years. Should the company remain open in retirement whilst Craig extracts dividends, or should we look at winding the company up and applying for Entrepreneur’s Relief to get the funds out in one go, with minimum tax leakage? How and when should he start to drawdown on the personal pension fund he had built up over the past 10 years? Today, the choices are wider than ever and guidance is essential.

It is fair to say Craig has come a long way in the past 10 years, and the goals he set himself all those years ago have been fulfilled.

Bill Saunders is a Certified Financial Planner at Acumen Financial Planning.

Acumen Financial Planning is hosting free financial surgeries as part of Financial Planning Week 2019 from 7th – 11th October for more details please email