Financial Sales Vs Financial Planning - What You Need To Know

One of the challenges we face as Fee Based Planners and Wealth Managers is how do doctors and dentists get to know about Graeme and Ray and the job we do?

After all, we know (and our existing clients tell us), that we are providing our clients with exactly the kind of service they want, and they love the way we work for them and not the product provider.

But of course how would a dentist in Yorkshire or a doctor in Surrey get to know this? One method that has seen success is that we are prominent in the major search engines (especially google). So, for example, if you search for 'financial advice for dentists/doctors' (without quotes) you should see us up there towards the top.

And this is where the story starts. One of the calls received in December was from a dentist in the Durham area. I referred to this client in an earlier newsletter, but the essence was this.

An Independent Financial Adviser, well known as someone who targets the dental market, had visited the caller - let's call him John - and had asked him a few questions, and John had told him what he thought were his priorities, and the adviser had made some notes.

Apparently, after about an hour, the adviser said "OK. What I recommend is that you invest �2,500 per month into a personal pension plan". John was already paying almost �500 per month into a couple of personal pension plans on top of his considerable NHS Pension, and so he asked if that meant it would be �2,000 in addition to these.

You may have guessed the answer...

"Oh no, it will be a new plan for �2,500 and we will stop the others, and I have the paperwork here". John looked at his wife (let's call her Jan), and said he would think about it. So that's how it was left when I received John's call.

He expressed his concerns at the indecent haste in coming to a big decision like this, and when he had turned to the back page of his pension plan quotation, he was staggered to see that this adviser would be PAID �19.500, YES �19,500 for this sale! John was not comfortable with this at all, and had the distinct impression that the adviser was more interested in the sale than him.

We suggested that, as John had read about what we do on our website, he could come in to our office with his wife, and I would demonstrate how we could help them. Like all our new clients, they were given some homework to do before our meeting, and they emailed me these before we met.

This information includes "what do you need to achieve in life and when" and "what progress have you made so far", based on the value of the practice/investments/Income etc.

After all, what could be more important than that?

John had very clear goals, and when we met it became increasingly obvious to him how different we worked (compared with the other adviser), and to his delight he felt that he had found someone he could work with.

Keeping it simple here - John and his wife, who is 9 years older, wanted to buy a cottage in the North West where they loved to holiday, and for John to slow down at age 50, as Jan would be retiring.

The question of course is "do we have enough wealth to be able to do this, or will we run out of money before we die?". Time and time again, the vital aspect of any planning had been missing from John and Jan's life - MEASUREMENT.

Having demonstrated the cash flow forecasts we use to help clients with this all important context, John and Jan now understood why we recommend this approach. If you don't know where you are, and you don't know where you are going, how do you know when you get there?

So we all shook hands, and I told them that we would meet again at their Strategy Meeting after two or three months.

Our strategy meeting was a week ago, and this was the result after studying their cash flow forecasts, and devising a strategy:

- Pension - stop all pension planning apart from the NHS. This saves �500 per month gross.

- Offset Mortgage - create an extra borrowing facility of �200,000 to buy a cottage now as a cash buyer. Increase payments to ensure all debt paid off by age 50.

- Look to raise more finance from the practice - accountant to comment on this, as a lower rate here than residential debt after tax relief. Potential savings of �25,000 over 15 years.

- Equity ISAs - use the spare income to invest monthly for the long term to create an accessible tax efficient 'retirement pot'.

- Wills - checked and various comments made by specialist solicitor.

- Lasting Power of Attorney - solicitor to action to ensure if one person incapacitated the other could take over their affairs.

- Life cover - overall level checked as ok, but for the same cost they could have individual cover instead of joint cover.

- Fill in NHS death in service form DB1 - this to earmark Jan as the Beneficiary.

- Income Protection - we changed one plan John had that was not occupation specific to a company that did protect him as a dentist.

- Inheritance Tax - existing pension fund had spouse as beneficiary. As we knew that Jan would not need this money, the children were nominated as the beneficiaries. Potential IHT saving here circa �25,000.

- Existing Pension Fund - this was transferred to a risk assessed portfolio, as it was way out of line with their risk tolerance levels.

- Annual Review - this to ensure they are kept on track, and to take into account any changes in their life.

The result? Very happy clients who now know exactly where they are, and exactly where they are going. The spare income they have is now concentrated in exactly the right areas.

The total cost, including investment implementation came to �4,750. This compared to the salesman's �19,500 for one pension plan, no strategy, no measurement, and ignored or more likely missed the other issues that needed dealing with.

Chalk and cheese!

Key Considerations:Be aware that the vast majority of advisers are, in our experience, paid only when they advise you to take out a policy. Since this is the case, the old saying of 'if you only have a hammer, everything looks like a nail' comes to mind.

They also do a totally different job. It's like comparing a Senior House Officer to a Senior Surgeon.

Action Point

If you have an existing adviser, or are looking for one you can trust; be very clear about what type of person you want to deal with.

Would you want to use a dentist who does not bother to say "open wide please" but proceeds to recommend treatment?

If you want to have a diagnosis before prescription, find a Fee Based Planner who works for you, and you will be assured that they will do a holistic planning job to optimise your financial affairs.

One tip - the next time you speak to your/an adviser, ask what type of cash flow forecast system they use. If there is a long pause - you will know!

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The Seven Most Common Financing Mistakes

As a serial entrepreneur and a former venture capitalist and angel investor, I've been on both sides of the table during a lot of financing pitches, and I've seen entrepreneurs make the following seven mistakes over and over. Don't shoot yourself in the foot by repeating them?getting financing is hard enough as it is.

Mistake No. 1 One of the most common mistakes entrepreneurs make is to believe their company is the only one that has the phenomenal, earth-shattering idea that they built their business plan around. They carry this belief right into the financing pitch session.

When you identify something missing in this world and you determine what the "pain" is surrounding it, you're potentially in the money. But chances are someone else has thought of your idea, too. Remember that according to copyright law you can't protect the idea itself?you can only protect the expression of the idea. Acknowledge that you might not be the only company that has thought of it and make sure to identify your potential competition. Think outside of the traditional market. Look far out on the horizon to determine where your competition might come from. Your idea might not be unique, but if you create and execute a solid business plan, you'll be ahead of the pack.

Mistake No. 2 Another common mistake entrepreneurs make in a financing pitch is to try to become friends with the financier. Financiers are business people whose primary responsibility is to help their clients make money. They are as successful as the investments they make on behalf of their clients. Dispense with the kissing up and excessive schmoozing and make sure you've got the numbers and a solid strategy for execution that will wow them.

Mistake No. 3 Don't give financiers everything at once. Qualify situations and the people you choose to share your business plan with. The business plan should speak not only of your idea, but also of how you will capitalize on it. The heart of it is your execution plan. And execution is what will make or break your company. Protect yourself by ensuring your execution plan doesn't get into unscrupulous hands. Number each copy you hand out in the footer of the document and track them.

Mistake No. 4 A common mistake is to overstate your financial projections by miscalculating market size, how long it takes to actually get a product developed and launched, and the length of the sales cycle. I have seen entrepreneurs get very enthusiastic about a product or service idea, but neglect to dig into how many people will actually want to buy it. Are you making a nice-to-have or a must-have? Your financial projections should reflect this. Be careful before claiming something overblown like "The market size for our widget is five gazillion people because everyone needs one!"

While investors are occasionally fooled by numbers over the short term, the company itself is the one that almost always takes the hit over the long term. Tight budgets and realistic projections may lengthen your process for getting funding, because they're not as flashy and initially impressive. But when you close your financing, it will be based on what you realistically think you can achieve and your financiers will ultimately respect you for this.

Mistake No. 5 Once an entrepreneur identifies a revenue stream, many dream their company will be on an easy path to profitability. But it is a mistake to assume that when you book a customer's order, you will also be able to book the revenue. Be sure that your chief financial officer stays on top of the latest in revenue recognition and keeps an eye on your DSO number ("days' sales outstanding," meaning how long it takes to collect payment from customers).

Spending too quickly based on orders gets a lot of businesses into a cash flow problem. But a little foresight, planning, and discretionary use of funds can go a long way. Entrepreneurs who treat their budgets with the same meticulous care as their product development are the ones who survive and eventually thrive.

Mistake No. 6 Another tricky part about growing a company is having a staffing plan that makes sense. Do you hire when you need people and can cost-justify them, or when you can see the need in the near future? It's best to have a core group of full-time employees plus a stable of part-time contractors. Have people in the hopper as well?you should always be networking, keeping a list of people you may want to hire.

There are certain folks you'll hire "as needed," such as salespeople. Every employee has a ramp-up time, too. I've never seen a sales person ramp up faster than 60 days. That's how long it takes to get trained on product features/benefits and to get on target for one's quota. Some members of your staff will need to be hired up-front, such as software developers (if you aren't outsourcing). Consider virtual staff and telecommuting to keep your office-space needs smaller.

Mistake No. 7 Here's something that most companies might not see as a mistake: bringing in unnecessary partners. There are certain partners who are essential to your business, such as funding partners. But you must justify each partnership: Each should bring some value that can be articulated. I remember seeing a deal come across my desk one day when I was a venture capitalist. It was for a company that partnered with other security software vendors. But when we looked at the multitude of partners they had, alarm bells went off because some of the partners didn't make sense. They were just "fillers," who served no apparent purpose.

Meaningless partnerships are time-consuming?and a liability. When an entrepreneur lists too many partnerships, with too little tangible payoff, financiers start to wonder what else they're wasting time and money on. Qualify your partners and articulate a business reason to have an alliance with them. Make sure your offerings are complementary. Your plan should state how you are going to co-market or co-sell and what the financial incentives are for each party.

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The Hidden Fees For Assisting Haiti Disaster

There are as many as 50,000 people may die in an accident 12th January, in Haiti.
Therefore, many people from around the world who have credit card donations to help Haiti, but most of us do not know that it could make banks and credit card companies happy of it.

From the recent report, Visa, American Express (AXP) and MasterCard have said to cancel all types of transaction fees for donations Haiti. It seems like too good to donors, namely, donors may suffer hidden costs for the transaction later. In general, credit card companies and banks generally get 2% to 3% decrease service charges.

Therefore, businesses, Credit Cards and banks are likely to huge amounts of money from charitable donations, the
approximately $ 250 million a year, depending on the analysis of Huffington Post. In addition, many credit card company may refuse waice their fees after major disasters. This is because the company credit card to increase its profit in the short term by grants spike.

In this respect, Capital One (COF) is the visible exception to this rule, the problem Giving Site No pay commission on donations. This means that 100% of the donation goes to its target. AXP announced that any processing fees waived for the donation, then how much business as really costs to business credit card? One expert says it's much less than 3%. Of course, credit card issuers to obtain the benefit of charities, but not much. According to Ben Woolsey from , as any other trader, charities are only one of them, businesses, Credit Cards have declined in percentage profit for each transaction, but that is central to their business model.

Generally speaking, charities could not really get a huge amount of the grant, without credit card transactions. Therefore, charities need to accept that not even the imitation. What about Haiti a disaster? Should be another exception? Many skeptics believe that transaction fees are just too well-tolerated, especially at this economic environment.

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What Kind Of Investor Are You?

When considering investments, what is your attitude to risk - defensive, cautious, balanced or aggressive?

Whether you are investing as part of a pension plan, investment ISA or simply buying stocks and shares, it's vital that you have a 'plan of attack' to help guide your investment - an investment strategy in other words.

But what makes a sound investment strategy?

Good investments balance the risks associated with investing with the potential rewards gained from investing. How you choose to balance that risk will often determine the kinds of investments that are suitable to your own needs.

If you have a high tolerance for risk - and are hungry for the big rewards - you may consider yourself a more aggressive investor. Someone nearing retirement on the other hand may take a more defensive or cautious approach to help ensure a viable annual income in retirement.

Defensive Investors

Defensive investors are concerned with maintaining the value of their investments over time - i.e. not losing. As a consequence a defensive investment portfolio might include lower risk investments like commercial property and high quality bonds with returns similar in nature to high-interest High Street deposit accounts.

Cautious Investors

Like defensive investors, cautious investors are not looking for the big gains associated with higher risk investments - they do however want better returns than what would usually be available through a High Street deposit account. A cautious portfolio might include some exposure to shares.

Balanced Investors

A balanced investor is likely to have a portfolio that is exposed to some degree of risk - say through individual stocks and shares - but is unlikely to fluctuate wildly in any given year.

Aggressive Investors

An aggressive investor is prepared to take bigger risks in return for potentially bigger rewards. They will be prepared for large fluctuations in the performance of their portfolios over a short period of time.

Of course, you could just as easily be a very defensive investor or a moderately aggressive investor - there are no hard and fast definitions. The first question is, "what do you want to achieve with your investments?" If you want to see big returns quickly, you'll need to be prepared to be more aggressive in your investments.

The second question is, naturally enough, "what is your appetite for risk?" Would you be prepared to lose money, and what would be the ramifications if your investments did lose value?

Whatever your goals or your risk profile, there is an investment strategy to suit your needs. Speak with your independent financial adviser and they should be able to help you develop a strategy and portfolio to meet your needs.

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