I had an interesting call from a gentleman on Friday morning.
He already has an adviser providing him with independent financial advice.
From what he told me the adviser is doing a good job in providing him with lifetime cash flow forecasting and advice about how to invest his pension funds and general investments; all of the things that you would expect a competent financial adviser to do.
The adviser is also described as a nice person, a family man with a nice personality.
There is just one problem. The adviser attends client meetings with multiple power point slides and presents a lot of numbers “When he talks to me my eyes just glaze over!” said the caller.
On probing him a little it became very clear that the adviser is doing something really important and advising the client based on the premise that he doesn’t want the gentleman and his wife ever to run out of money.
You would have thought that was particularly good objective, I certainly do.
But the interesting thing is that the clients don’t actually mind if they do run out of capital and for three very good reasons.
First, they own their own home and it is unencumbered and currently rising in value at a rate quicker than they want to spend their capital reserves.
Secondly, they have a guaranteed retirement income from their pensions at a level that absolutely covers all of their essential household bills.
Thirdly, they have no one to whom they will want to pass on their estate on death.
What they want to do is to spend more money now.
They enjoy the theatre and want to go more often. They have friends in the Far East and would like to travel more whilst they are physically able to do so.
A quick look at their finances confirms they could spend the extra that they want to spend and realistically still never run out of money.
I wonder if sometimes the numbers and the assumptions that we use masks something more important?
Saving, investing and being prudent make real sense, but sometimes so does spending your money.
What do you want from your adviser?
Is it sometimes that what is wanted is permission to spend?
