Feature Article

Financial Planning – “From the Womb to the Tomb" By Taurus Your scribe was awakened from his dream of peace by a hearty whack on the back heralding the arrival of my long time friend Mike Clancy. “Thought I’d find you here, I have volunteered you to write 750 words on “What to look for in a Financial Advisor” for the Quarterly Review”, was his opening remark. Having mopped the port spill from my slacks I acknowledged the request with a scowl hiding the secret pleasure in being asked to dust of Taurus. ”Life Michael, Life – that’s what I look for in a financial planner.” You are the only person responsible for  your financial decisions. However, from time to time, you will seek a variety of inputs and recommendations from which you may direct brokers, agents and asset managers, as you would bankers, accountants and solicitors, to act on your behalf. Your dependence on all or any one of the above will depend on your own personal requirements and the extent to which you are motivated to participate in your investment cycle and the management of your assets.  Financial planning is a life cycle process, “Womb to Tomb”, where the type of investment and method of management, like all things, will change during the period and which will usually be a quantum of the “RISK FACTOR” tempered by the ability to properly afford to the take risk and which prevails at any given time in your personal investment cycle. Measure risk, know the difference between speculation and secure investment, proportion it, and apply the measure to your investment decisions. The Taurus philosophy is not only for the taking but also for the teaching, Husband to Wife, Father to Son, Grandmother to Daughter, for the sooner it is introduced to your “way of life” better is the chance of establishing and successfully managing the investment cycle. The RISK cycle relates strongly to ones ability to regenerate capital loss hence it is usual that the older you are the more sensitive you are to the risk factor. You enter the work force at between 15 and 24 years, a time in ones life when the ability to regenerate capital is at its best. At 27 years, on aggregate, one marries and is committed to the costs associated with raising a family, providing accommodation, furniture, and fittings, schooling and associated expenses. At the best an equity portfolio is maintained but rarely expanded as debts associated with the “fixed asset” component are attended to. Over the next 18 years, to age 45 yrs., the provider is working towards maximum earning capacity which finances the borrowings (sometimes with some help from inflation). You own the car, the house, the furniture AND THE KIDS ARE GOING TO WORK. We have a respite through to about 60 years where we have retired or are approaching retirement. At retirement we enter the minimum risk zone with respect to CAPITAL albeit some of us will be in a position to split our portfolio into portions;    a.                   To meet the future needs of the husband and wife separately. Wives tend to live longer but may, following a lifetime of dependence, lack the skills or confidence to manage their investments.       b.                   To meet the perceived requirements of your beneficiaries. Investment is usually broken into three distinct but linked sectors which together form your total investment portfolio and against which you will measure risk. a.                   Insurance and Assurance – insurance of assets and assurance with respect to life or whole of life, education, endowment, health etc. b.                   Real property – the ownership of a house(s), rural estate, etc. through to “say” equity in a property trust portfolio and which may be self managed or managed by others. c.                   Portfolio and cash management – the development of a share or fixed interest and cash portfolio which is self managed or managed by an asset manager(s) or some combination. The self manager can be very successful but Taurus would urge such investors to take some professional instruction, most stock exchanges have such courses, and be constantly in touch with “the market” if good performance is to be achieved. The position of the macro or micro economic cycle may, from time-to-time, govern the “weight” of your investment into any particular sector. The amplitude (high and low) of the cycle will also have a profound effect however, except for the lucky few; the latter is usually measured in 20:20 hindsight. The selection of a Share Broker, Funds Manager, Real Estate and Insurance/Assurance Broker will be determined by who you are, what you are and where you are. Keep your friends close but keep your asset manager closer. Taurus says…..Softly, Softly catchy monkey. Buy or subscribe to some well established financial publications, initially with a view to identifying the persons with whom you want to do business or to represent you. If you do not like your first choice, for what ever reason, do not throw in the towel, try another and if necessary another until you find a person or persons with whom you feel comfortable. Check credentials ALWAYS carefully, meet with them in their office and make very very sure they are what they purport to be. Be wary of investment salespersons, they are everywhere and will sell anything for a commission….the RISK is yours. Trustees: If you and your family are constantly “away from your home” you may consider appointing a firm of trustees to attend to your affairs. The governance of Trustee firms is usually such that there are not many and those that do operate are of long standing and well known. Again, consult your Investment digests where you are living or subscribe to one or two in your home country. Few Asian countries have corporate governance that embraces “Trustees.” O.K. you have found a professional funds manager with whom you have rapport and confidence. Your funds manager will spend sometime with you in determining your “PERSONAL REQUIREMENTS,” and then start to structure your portfolio which will be presented to you, as a proposal, for your approval. The mix may vary from time to time, as may the market value of your portfolio as you pass through the economic cycle. He we are all inherently greedy and like to maximize our returns from minimal risk – always a hard call. What is important is the mix “Cash “=  x %, Real property = x%, Insurance/Assurance = x%, Fixed interest equity = x%, Share equity = x%, Speculative equity = x%, TOTAL = 100%. Alternately, for the person who cannot give the time nor have the inclination to be involved in the management of their portfolio your funds manager may recommend investment into one or more Managed Funds which abound in the equity markets of the world. The better ones can be identified by the investor by reviewing performance over “say” five years. On the other hand your funds manager will select for recommendation the funds to suite your personal requirements. Your Insurance/assurance agent will remind you to pay your premiums. Your Real Estate agent will collect the rent and make appropriate recommendations from time to time. In the future we will deal with the hands on aspects, economic analysis, what to buy and when. Good investing Taurus _ Click PDF Icon to download PDF Version.