1.2 Savings and Investments - Deciding Factors
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For many people, the only way to achieve large ('large' being comparative)
sums of cash is to save regularly over as long a period as necessary.
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The fact find and analysis must differentiate between:-
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Only by separating the two is it possible to prioritise and plan
accordingly. The emphasis for the adviser must be on 'needs'. This
is not to say that 'wants' should be ignored; indeed, planning will
be done following the client's wishes. The point to be made, however,
is that whilst 'needs' should have priority, the final planning
may include items that are not strictly speaking 'needs'.
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Where this happens, planning should be amended to take this into
account.
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Similarly, it would not necessarily be good planning to tie up
all disposable income into a tightly designed structure. There needs
to be some leeway and flexibility, particularly if disposable income
varies, and impulse must be catered for.
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Existing assets may affect the client's future actions:-
- Do they produce income e.g. rent or dividends.
- Do they require expenditure on such things as maintenance or insurance.
- Are they easily disposable.
- Are there any charges on them which will need to be repaid at
some point.
- Is there a tax involvement e.g. capital gain rolled over, tax
on income produced, future IHT liability.
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Full knowledge of the above and other related details will reveal
the existence of any current income and/or capital which may be
used in more efficient ways to further future plans.
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Similarly, identifying areas of tax liability will be useful in
selecting investments which can make use of the tax situation.
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The client's age may also have an effect in that the wider the
experience and knowledge, the wider the potential range of requirements
and queries that will need to be satisfied. Additionally, the older
the client, the greater will have been the potential for accumulating
capital and other assets, and the greater the potential for older
members of the family to be leaving inheritances. In such situations,
even though the provisions of a will may be known, the prospect
of inheriting cash or valuable assets should not affect immediate
plans to cater for 'needs'
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