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Financial Plans - 11 Essential Elements

A financial plan is more than simply locating investment products if you have money to invest or recommending property. Your investment decision should NOT be looked at in isolation but rather, be part of your overall financial needs and how do you know if your plan is good value?

The following checklist will help you decide if you need a financial plan or if your plan is out of date. Your financial plan must have the following 11 essential elements:

1. Your Profile

Your plan will give a detailed outline of your personal details and current circumstances. Ensure these are correct (if not, is it a quality plan?). Information you give will assess your attitude to risk and this will determine what recommendations are made in your plan.

2. Identifying Your Preferences

Rather than try to fit you into specific products your plan will make sure the products fit you and your profile. Your plan will take into account your risk profile, financial goals and your previous investments - what you liked or disliked about them.

3. Assumptions will be spelt out

Your plan will show on what basis the recommendations have been made and if these are based on your own or your advisers view on likely investment returns, inflation and life expectancy.

4. Your Income needs

Your plan should state your annual income needs and expected income from the recommended investments.

5. Tax

Your plan will outline your marginal tax rate and the tax treatment of each individual investment. You will be referred to a tax specialist if required.

6. Risk Management

All your insurance needs will be assessed to ensure you have appropriate policies in place so as to cover you against the risk of income loss.

7. Retirement Planning

Any plan that is planning to build wealth for you should have what your retirement needs are – no matter if it is 4 or 30 years away, and also the age you wish to retire.

8. Estate Planning

As a minimum your plan should note the existence of a will and what action if any is required to update it. In addition an enduring power of attorney or the use of a trust should be discussed and outlined in your plan. You will be referred to an estate planning specialist if required.

9. Reasons for the Recommendations

Your plan should clearly state why your adviser has recommended a certain course of action as well as the reasoning behind each individual product recommendation.

10. Disclosure and Fees

Your plan will outline the plan and product fee structure and contain a comprehensive disclosure document your adviser.

11. Plan Review

Your plan is of no use to you if you don’t have regular reviews with your adviser to talk about changed circumstances – either in your personal life, tax rate, investment market place or new products available.