I had a great client meeting yesterday morning. We spoke about retirement planning and he explained how he needed to accumulate £1 million in his pension pot by age 65.
What the client said was “I need a strategy to get that done”.
It set me thinking about what such a strategy might look like. What steps did he need to take which taken together would form that strategy?
The good news is that he has already built up a pension fund and it is being actively invested by a Discretionary Fund Manager (DFM) we recommended to him. The two of them make a good team and seem to understand each other very well.
Step one in the strategy was to take some of the profits that the portfolio had made from some Investment Trust shares and re-invest that profit into other equities. In this case the chosen geographical sector was Asia Pacific.
Similarly the corporate bond funds had done well and some profit taking made sense there as well.
The DFM was also keen on European shares so some of those are going to be purchased.
Why are we doing this?
Put simply the portfolio was heavily weighted towards fixed interest securities and cash, not necessarily a bad thing by the way, but to achieve the goal greater equity exposure (despite the last ten years!) seemed to make sense.
Part of the strategy also involved the acceptance that more contributions are needed in the future so a plan to do that was created. Strategy should involve a more holistic approach to planning so we agreed that other financial assets needed to be included in the target pension pot.
The client’s ISA account, expected inheritance and downsizing at some point in the future also needed to be taken into consideration.
For my part I am a strong believer in reviews being an integral part of strategy. We agreed that twice a year we should meet supported by interim phone and email exchanges at appropriate times.
So how might I sum up this client’s strategy?
Invest for growth, make further contributions when possible, take other savings and investments into account and review, review and review again.
