What does a Financial Advisor do?
The simple answer is: A Financial Advisor suggests ways in which people can better manage their money to meet their particular needs and goals.
A Financial Advisor, however, offers much more than this…
For example, a Financial Advisor can advise on and suggest strategies to help you reach your financial objectives relating to budgeting & cash management, debt management, tax planning, inheritance & estate planning, savings & investments, retirement planning, and life insurance solutions.
A Financial Advisor will also provide valuable insight, using these strategies, for how you should be managing your money to reach your financial goals at every crucial life stage, be it, buying your dream home, getting married, planning for children, advice when changing jobs, moving up in the workplace or starting your own business, and reaching your retirement goals. This in turn will help you make smarter decisions and avoid making expensive mistakes in life, which will make it easier for you to achieve your goals.
Essentially, the advisor’s mission is also to close the gap between where you are currently (financially) and where you’d like to be.
Let’s take a deep dive into the various solutions available:
How can a Financial Advisor help me?
Financial Planning gives a Financial Advisor the opportunity to get to know you, to understand your financial needs and concerns, and establish what you would like to achieve financially – your goals and objectives.
However, financial planning is not only about the destination, but more importantly, its about the journey through which a financial planner will guide you through, using the following techniques:
Properly monitor and grow your income, carefully analyzing spending patterns and budgeting to manage your cash flow more effectively.
2. A Tailored Plan:
A detailed, step-by-step plan that’s tailored to your individual situation, and that can develop with you as you move through your different life stages.
3. A Investment Strategy:
Choosing the right Investment strategy (to combat inflation) to achieve your objectives in a the appropriate time frame.
4. Risk Planning:
Plan for any unexpected risks that could potentially set you back with an unwanted financial burden, for example, putting in place adequate Life Insurance to cover debts or income to ensure your loved one’s that are left behind are covered financially.
5. Financial Confidence:
Education and context to help you understand and gain confidence in your financial plan.
Guidance and support to provide good savings and investing habits and help you avoid common investing mistakes.
If you concentrate on staying in control of your day-to-day finances, reduce debt, and save regularly, these are responsible actions that will help you to keep on track with meeting your goals; and have the financial freedom to make the choices that allow you to enjoy life!
Pensions & Retirement
Saving for retirement is extremely important. People are living longer and are leading more active lives in retirement. As a result, it is important to think about where your income will come from when you retire.
Pension saving is one of the few areas where you can still get substantial tax relief. For example, Pension offer tax breaks and incentives, such as tax relief on contributions where you can claim up to 40% tax relief on all your pension contributions (at your higher rate of income tax).
Some people may have an opportunity to accumulate wealth without using pension schemes – perhaps through their business ventures or other assets. But for most people a pension scheme is likely the best way to supplement their current lifestyle and income into retirement.
Important Considerations for Pensions:
1. Planning for Retirement:
Taking control of your retirement planning decisions earlier on in life, can help you build up an extremely valuable asset.
2. Adequacy of Income at Retirement:
Although the State pension is intended to ensure that everyone receives a basic standard of living in retirement, without a Private Pension in place the State Pension alone may not be enough to meet your income needs in retirement.To illustrate this, the current Irish State Pension is €253.30 per week (personal rate 2022). The average wage is €862 per week (CSO – Q4 2021). This leaves a shortfall / average weekly gap of €608.70.
3. Considerations for Women:
Regards pension provision, there are a number of areas such as maternity leave, part-time working and breaks in employment where pension advice may be of particular interest for women to consider Also, women on average live longer than men and so are more likely to need their pension to last longer.
4. Protection for Families:
Pension schemes can provide protection in the form of lump sums and pensions to dependents in the event of a member’s death.
5. Tax Advantages:
The State provides generous tax reliefs through Pensions, such as on Tax relief on contributions made to pensions, Tax-free growth within your Pension Investment, and a Tax-free Lump Sum on retirement.
By taking small steps and committing to putting away a certain amount into your pension each month, this can work towards the life you want to live in retirement. When it comes to advice on one’s finances, there is no ‘one-size-fits-all’ approach. The best pension option for you depends on your personal circumstances and work situation so its advisable that you speak to a financial advisor first.
Saving and Investments
When it comes to planning your future, investing is fundamental – simply one of the most essential decisions you can make if your goal is to be financially successful. Simply put, if you had to keep your savings on deposit in your local bank account or credit union, you’d be losing money (when adjusting for inflation).
A sensible strategy that many investors use to reach their particular goals is that of multi-asset funds. The purpose of allocating money to a multi-asset strategy is to maximize the opportunities for compelling risk-adjusted returns by taking advantage well diversified asset classes.
Take the Zurich Prisma 4 Fund for example. With an aim to generate long-term capital growth through capital gains and income from investing across a diversified range of global asset classes – equities, bonds, property, commodities, cash and alternative assets, the fund has a medium to high risk rating set to outperform over rolling 5 year periods. At the time of writing, the fund has achieved an annual fund performance of 7.1% p.a since its launch. Cash, which invests in deposits and money market instruments has delivered -0.75% p.a over a similar period.
Why Cash is NOT King:
In addition to the above-mentioned example, over the last number of years, 10, 20 even 50 years plus, returns from investments such as equities and bonds have far exceeded that of cash. Investors sometimes think of cash as a safe haven during periods of volatility, or even as a steady source of income. However, with interest rates being relatively low, the returns you may be getting from deposit accounts probably won’t deliver the long-term returns you need.
According to Investopedia, the U.S. stock market has long been considered the source of the greatest returns for investors, outperforming all other types of investments including financial securities, real estate, commodities, and art collectibles over the past century. A 10-year holding period performed even better, with returns averaging about 13% – and zero negative returns.
What are your goals?
Before you decide where to invest or put your savings, you may want to first set out your future goals.
Examples of such can include: Your wedding & marriage, Securing your dream home & raising a family, building up funds for your children’s education, starting a new business, or saving for retirement.
Once you have identified your goals, a Financial Advisor can create a personalized plan suited your investment strategy to help you reach them.
Income protection insurance is an insurance policy that pays out a regular cash payment (each month) that replaces part of your lost income if you are unable to work due to a medium to long-term illness or disability (It does not cover redundancy). It must also not be confused with private health insurance.
To qualify for this insurance, you must be in full-time paid work or be self employed. Cover can be obtained between age 18 and 59, and can reach age 70 with certain insurers. The replacement income starts paying out after a certain period of time. This is called the deferred period.
Do I need Income Protection?
Consider this… You are put into a situation where an illness or injury stops you from working for a couple months or even years. You are trying to recover and get better, and in so doing you ask yourself, “where am I going to get the money to pay for my monthly expenses and commitments??”
Now sure, you may get some sick pay from your employer, or have some savings in the bank, however, that probably won’t nearly be enough to pay for expenses for medical treatments or pay off monthly bills such as your mortgage repayments, car insurance, utilities, weekly groceries, and children expenses & education (well let’s not go down that road…). Considering the weight of the above, you would indeed need sufficient income to support yourself and your family financially. Here, Income Protection has you covered!
Important considerations for Income Protection:
You may also need income protection if you:
- Are self-employed and would have no source of income if you couldn’t work due to illness or disability.
- Have little or no sick pay from your employer.
- Have no ill-health pension protection.
- Have dependents who rely on your income.
- Have no other source of income.
- Do not have sufficient benefits to replace your lost income and/or cover your expenses.
Mortgage Protection cover is a life assurance policy designed to protection your home by paying off the outstanding mortgage (loan) in the event of your death – thereby, protecting your family from a financial burden.
Prior to arranging your mortgage with your lender, you are entitled to arrange your own Mortgage Protection insurance through any Life Assurance company or Intermediary of your choosing – of which most of the time you may be get better value. It is not compulsory to take out the policy with your lender.
1. Compulsory: If you have a mortgage on your home, it is compulsory to take out Mortgage Protection insurance.
2. Protection: It protects your family from a substantial financial burden.
3. Death: If you pass away during the term of the policy, the policy will pay off the remaining amount on your mortgage.
It is true that you don’t buy Life Insurance because you are going to die, but because those you love are going to live! No-one likes to think or talk about a time of their passing, however, your loved one’s will no doubt thank you and remember you for considering their future.
Life insurance pays out a cash lump sum if you die during the term of the policy. It is one of the most important types of insurance cover available to you and your family because it helps to provide financial peace of mind should something unexpected happen.
Do I need Life Insurance?
The amount of Life Cover you will need to take out will depend on the Lump sum required to cater for financial circumstances such as the following:
- To pay off all debts you owe (mortgage, car loan, credit cards)
- To invest the money for future income.
- To cover any known, large future expenses (e.g., school fees, child’s wedding, etc.)
To determine whether you need Life Insurance, you need to first take into account what your financial obligations are and what impact they will have on your loved ones if you were no longer around. For example, if you have a mortgage you may want to decide how you plan to fulfill many years of those monthly repayments. If you have children you may want to consider their future education and school or college fees, etc. If you find that you have little-to-no provision for your loved ones (such as savings, sale-able assets, income, investments, or pensions) then a life insurance policy makes a lot of sense.
Life Cover should be considered for the following Life Stages or events:
When you eventually get to that special day of tying the knot, a new chapter of joy and adventure begins, but with that, also comes responsibility. When uniting families, so too will you combine your assets. Here, Life Insurance is an important tool to ensure that you both have each other’s well-being in mind should one of you pass away unexpectedly.
When you take out a joint policy, or two single policies on each other’s lives, you are making sure that the policy pays out on not just the first death, but also the second, ensuring your surviving dependents are also taking into consideration.
Buying a new home:
If you are responsible for your mortgage repayments and you pass away before your mortgage is fully paid off, the burden then falls to your partner or loved ones. Life Insurance, or in this case, Mortgage Protection Insurance (otherwise known as Decreasing Life Cover), will ensure that your loved ones will meet this financial commitment after you are gone. It is also compulsory cover that you need to take out to cover the mortgage.
Having a baby:
Here, Life Insurance is one of the more important considerations. This is because there are many costs involved when raising children, such as, crèche, private education, university or college, food, healthcare, clothing and baby essentials, etc. Its important to note that should you pass away unexpectedly, Whole of Life or Term Insurance policies can be used to provide continued support by paying out a lump sum towards your children’s needs going forward.
Inheritance Tax: The next generation
When you intend to leave money or assets behind for your children and/or financial dependents, such as a property, its not as easy as simply handing over the keys to them. Depending on the value of the inheritance, they could be paying a sizable amount of Inheritance Tax on the transfer of ownership. A Whole of Life or Section 72 Insurance policy is a very useful Revenue approved policy that is specifically designed to cover the inheritance tax to ensure that your beneficiaries are not short-changed on the amount you intended for them to receive.
Planning for a funeral:
According to a 2018 review by Royal London, basic Irish funeral can cost anywhere from €2,950 to €7,500 and potentially more. Therefore, when discussing a Life Insurance policy with your Financial Advisor, its worthwhile discussing how much additional cover or a Funeral Insurance Policy needed to payout upon your death. This will prevent your loved ones from paying out of their own pocket.
Serious illness cover is a long-term insurance policy that pays you a lump sum if you are diagnosed with one of the specific illnesses or disabilities that the policy covers. The money that is paid out to you can be used to cover essential bills when going through a challenging time.
A few of the many serious illnesses covered are:
- Cancer of specified severity
- Heart Attack
- Kidney Failure
- Major Organ Transplant
- Parkinson’s Disease
- Multiple Sclerosis
- Loss of Limbs.
Why should I consider Serious Illness Cover?
Cancer mortality in Ireland shows that 1 in 4 deaths in Ireland is caused by cancer.
- Cancer is the biggest killer in Ireland.
- It accounts for approximately 30% of deaths every year.
- One person dies from cancer every hour in Ireland. (Source: Irish Cancer Society)
Serious Illness Cover can be purchased as a standalone or it can be combined with Life Cover or Mortgage Protection under one policy.
Business Assurance is essential as it can help put in place monetary arrangements to protect your business financially should you or one of the key persons in the company pass away. Business Assurance can be taken out by a company of any size, where there is a need to protect against the loss of an extremely valued employee, owner, or partner of high financial or strategic importance to the business.
With a Business Assurance policy, you pay a regular premium based on the cover required. If the unexpected happens and a person dies, or becomes seriously ill, the policy will provide a lump sum to compensate for this event. This can then be used to offset any financial losses incurred to ensure continuity of the business.
Why should I consider Business Assurance for my company?
- Protection: If a key employee dies, a cash sum is paid to help maintain the business.
- Unaffected Profits: Avoid a reduction in company profits.
- Continuity: Can help minimize interruption to business activity.
- Financial Assistance: Paying your company bills, or paying outstanding bank loans.
- Staffing: Can help provide resources to find a suitable replacement for the employee.
- Stability: Purchasing a deceased Partners or Directors share of the business, & ensuring their estate receives the shareholding’s market value.
Availing of this kind of life insurance can give additional security to your business. As an employer, it can bring you peace of mind in the knowledge that you are protected from the financial fall-out due from the death or incapacity of a very important member of your staff.
Reviewing your Plans & Policies
Annual financial reviews gives you an opportunity to evaluate your financial situation.
If your personal circumstances have changed, you may need to update your Financial Advisor to ensure that your policies and plans are still suitable to meeting your financial objectives.
When we receive that annual renewal notice for our Home & Car Insurance, we no doubt make haste to compare different policies and see where where we can save on our annual premiums or find better value. Similar consideration needs to be given to your protection policies.
This is important because as your personal circumstances change, so do your Life Insurance needs.
- Suitable Cover: Your cover is still suitable compared to when first taking out your policy – has your debt increased or decreased?
- Accurate Cover: You are not under-insured OR paying for cover you don’t need.
- Financial Responsibilities: You are aware of your financial responsibilities. Consider income you will need to supplement for the future if you’re no longer around, such as, childcare costs, college or school fees, the mortgage, inheritances, large debts).
Life Stage Considerations:
- Marriage: You may want to ensure that your partner is named as a beneficiary on your Life Insurance policy, not to mention the addition of a new baby.
- New Job:A promotion often times means an increase in income – ensure that the level of income on your Income Protection policy is adjusted to meet these needs.
- New Debts: Have you borrowed capital to start your own business, or have taken out a mortgage? This is a perfect time to assess your cover.
Mortgage Protection Policies
Usually, because consumers are so excited to obtain their loan when buying a new home, they sign their mortgage protection policy with the bank at the moment of mortgage approval. However, the banks are in many cases tied with only one provider. So the premiums obtained at the time are not very competitive.
If you feel you could benefit from more affordable cover on your Mortgage Protection policy, a broker can help search the market and compare a number of policies from different product providers for the most competitive price and cover available. Here’s something to consider:
Can I switch my current policy?
Of Course you can! You can apply for new insurance at any point during your mortgage. Most of the time, clients who request a quote from an impartial broker save a significant amount of money by switching from their previous policy obtained from the bank.
If its the case that you decide to switch your mortgage to a new lender, you can simply assign your policy to your new lender. You will usually have a greater choice of optional benefits that you can take out on the new policy such as Serious Illness cover.
Why should you consider reviewing your Pension?
- Save on annual charges
- Fund options better suited to your needs & Attitude to Risk.
- Calculating projected benefits
- Ensuring pension contributions are tax-efficient.
- Maximize income potential and options for/at Retirement
Reviewing your Pension & Protection policies regularly is VITAL to ensure that your plans are still suitable to your current circumstances, and that you are getting the best possible value on them – giving you peace of mind.
When should I contact a Financial Advisor?
1. Significant Life Events
Going into a marriage, combining two sets of finances can get complicated. A Financial Advisor can help couples set and focus on shared financial goals, and improve on their financial outlook.
A Financial Advisor is often needed before a divorce settlement is agreed upon to make both parties aware of their entitlements and help them take control of their finances. For example, a Pension can be one of the biggest financial assets that a person has. Here, a Pension Adjustment Order is an important consideration for the following reason; If one person has a substantial pension, and the other person who worked in the home has no pension, the court can order that part of the pension be shared with your former spouse or partner, and/or any dependents. This is to make sure that each person is provided for.
Kids can change the expense structure of your household and add new financial goals to the list. For example, childcare costs, paying for college, and managing varying household expenses. When becoming parents, what is often overlooked is Life Insurance. It is crucial to ensure that your partner and your new born are covered financially should the unexpected happen. For instance, if the breadwinner passes away, a Life Cover policy would pay out the amount needed to provide a steady income for the remaining loved ones, and pay off remaining debts.
If you come across a significant inheritance such as a bequeathed property, gift, or a large sum of money, this is likely one of the most critical moments to consult a expert advice. A Financial Advisor can help you decide how best to handle the inheritance in the short term and advise on a long-term plan that takes all of your assets and obligations into consideration like a succession plan. Inheritance Tax Implications can also be significant, especially with wealthy families.
For example: You as a parent owns a property valued at €500,000. Your child (the beneficiary) eventually inherits this property from you claiming ownership of the property. Any amount inherited over the individual Tax-free threshold of €335,000 is liable to Capital Gains Tax (CGT) at the current rate of 33%. So €165,000 (€500,000 – €335,000) would be liable to tax at 33%. Therefore, your child is left with a tax bill of €54,450 (€165,000 x 33%). Now you might be saying, “Well, how do I avoid paying all that tax!?” Here, your Financial Advisor puts your mind at ease and comes up with a solution for a Life Insurance policy called a Section 72 whole of life policy is specifically designed to deal with inheritance tax, by providing a tax-free lump sum to cover the tax bill.
Starting or managing a Business:
A Financial Advisor can offer many benefits to helping you start and manage your business, such as:
- Providing accurate projections that will help you establish and then grow your business.
- Ensuring that your personal finances are in good order along with your business finances. The two need to be coordinated for cash flow, investment and tax purposes.
- Setting up a Company Pension Plan for the employer and employees, providing for a tax-efficient way to extract wealth from company profits and help ensure that both the employer and employees maximize their wealth and are financially secure in retirement.
- Protecting your business. For example, if a Key Employee falls seriously ill, or were to pass away, Key Person (Business) Insurance would compensate a company for the financial loss by providing a lump sum to to cover the business as a result. This would help minimize interruption to business activity by providing resources to find a suitable replacement for the employee.
Selling a Business:
Selling a business reshuffles your assets and probably changes your income. Both outcomes affect how you should manage money and investments going forward. A Financial Advisor will help you to establish a business succession plan, set up buy-sell agreements or put a disaster recovery strategy in place.
Getting a New Job or a Promotion:
An increase in income unlocks more money to pursue your financial goals. You may need guidance on how to invest that extra income efficiently. When moving to a new job, many employees forget about the benefits they have built up with previous employees over the many years, such as Pension benefits. A Financial Advisor will help you to access those benefits that you are entitled to, and provide you with pension investment options that would best suit your needs (based on your attitude to risk). For more on this: Pension Options when Moving Jobs >>
2. When Finances Grow with Complexity
Finances naturally get more complicated over time, even without big life events or changes. As you get older you take on more responsibility, and you may start finding it increasingly difficult to manage it all. Financial advisors are particularly useful in this scenario. A good advisor will take a comprehensive view of your assets and identify strategies to optimize your investment returns (while managing your risk), making use of strategies to reduce ongoing tax, and ensuring you are protected for unforeseen events.
3. Lack of Time or Expertise
Managing your money and investment can be like a second job, one that you don’t have time for. If you don’t have time for research and monitoring your portfolio. Here, a Financial Advisor can come in handy by taking over the tedious work and getting you involved when its time to make decisions. Similarly, you might not feel comfortable making investing decisions. You can get the support you need to make solid decisions and the education needed for best practices in money management.
Outcomes of working with a Financial Advisor
1. Wealth: Advised clients build more wealth and have greater net worth over time.
2. Reduce Complexity: An Advisor manages complex financial information on your behalf and highlights what matters most to you.
3. Achieve your Goals: An Advisor can help you take decisive action, and in turn, making you more successful at achieving meaningful goals.
4. Encouragement: A Financial Advisor can provide emotional support during difficult financial challenges, much like a Councillor.
5. Retirement Savings: Clients who work with Advisors are far more likely to have sufficient savings at retirement.
6. Confidence: Financial plans and advice will keep you better informed when making financial decisions and will leave you more confident in your financial future.
We know that clients not only value advice, they also appreciate added value. This is something Financial Advisors & Brokers can offer, with a holistic approach, when identifying and meeting client financial needs. If you need advice or have any queries, feel free to leave your details below, or pop into us for a coffee and a chat.
Where to find us
If you are looking for a Financial Advisor near you, you can locate us at the famous Walkinstown Roundabout in Dublin 12.
Address: Greenhills Centre, Units 1 & 2, Greenhills Rd, Walkinstown, Dublin 12, D12 YH22.
If you are based outside of Dublin, we have Financial Advisors located in Co. Wicklow and Co. Cork (Munster), who would be happy to commute to you.
Click on the map below for directions to our offices…
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