It pays to do your homework

Like many Financial Planners I want to make sure that when I describe a possible course of action to my clients that they fully understand the advantages and disadvantages of any action.

As I explained to my prospective clients this morning, when we make financial decisions there are always advantages and disadvantages and they need to be given equal weighting.

In this case they were both considering taking benefits from their pension funds.

They have jointly and successfully built and run their consultancy firm over many years and now, well this summertime, they were considering retirement and taking the benefits they had worked so hard to accrue.

I was entertained by the fact that they had tried to retire before but found it “boring” but this time were convinced that it was the right time to retire.

We engaged in a wide ranging discussion about retirement options which because of other assets included doing nothing immediately with their pension fund, phasing benefits in over time, my favourite subject of taking tax free cash and spending it as income, buying an annuity or indeed income drawdown (unsecured pension to give it its full title) or indeed a combination of some of these.

I probed a little about their understanding of income drawdown and must say I was most impressed by the answers that I received.

There was a good understanding of risk, cost and indeed possible tax consequences on death. They had certainly done their homework and of course this was primarily supported by a Google search.

But what was really good was that they fully understood the difference between information and guidance (as provided by the Internet) and specific and personal advice incorporating all the choices and options followed by a suitable recommendation.

If you are engaging with a Financial Planner for advice then certainly consider doing some desktop research around the subject of interest. It makes understanding the advice that much easier.

Photo credit: Flickr/jordanmerrick