Case Study - The Financier

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When Paul and Sophie first came to us, they had some fairly common concerns. They wanted a plan for the future and included in it was whether they would have enough for their children’s education.

“We want an idea of a roadmap, something we can work towards.”  Paul had a good job and was earning over £350k p.a. They want to live on £150k p.a., pay for their two boys to have a private education, and be able to visit their parents in the Australia at least annually. Their initial requirements were pretty basic – check our long-term plan, do we have enough insurance, what about estate planning, which pension investment strategy should use and so on. However in the vision meeting, they soon discovered that there was some deep concerns. Paul was actually very worried about how he was living his life and felt like he was operating on remote control.

Paul has a simple philosophy on parenting. “It’s binary” he says. “You’re either there or you’re not.” He’s also always had a dream to create his own business. “I’d rather try it and see it fail than live with myself knowing I hadn’t tried it” He says, “It’s about self-worth”. But at the same time, he knows that he’s in a very good position. He has specialist expertise and he knows his employer will find him difficult to replace. He knows he can earn well and accumulate significant wealth through options and surplus income. But at what price?!

We created different financial models to evaluate and compare a number of different options available including:

• Base model case – hang on in there. This one assumed that he followed the expected path and continued to climb the corporate ladder ending up retiring at age 65
• New business – succeed
• New business – mediocre
• Hang on in there for 5 years alongside the new business – mediocre

• Implemented cash flow analysis to ensure that current lifestyle can be maintained and the boys education costs were covered over the next 5 years and beyond
• Implemented a new low cost investment strategy across their investment and pension portfolios in order to target a higher return over the long term
• Implemented a new tax-efficient investment portfolio to maximise the returns from any surplus income helping improve cash flow via the income tax savings

After mapping out a variety of planning scenarios and strategies, they decided that their children’s education was very important and for Paul, a key component of parenting. Continuing in his current role for 5 years didn’t seem like too much of a price to pay. He said it felt better just knowing why he was ‘sacrificing’ and that there’s a definite end point in 5 years.