Covid-19 spurs more people to seek financial advice, but it’s not just for times of crisis
The pandemic has placed pressure on families across the UK. So, it’s not surprising that more people are seeking financial advice and thinking about their long-term security. While financial advice can be incredibly useful in a crisis, an ongoing relationship with a financial planner can be just as valuable.
After a year of lockdowns and social distancing, 53% of UK adults say the financial crisis caused by Covid-19 has prompted them to seek professional financial advice, according to a survey from Prudential.
More than eight in ten (85%) respondents said they had financial concerns when they thought about the next 12 months. Among the concerns were:
1. Having to use savings to make ends meet (23%)
2. Investments losing money (20%)
3. Reduced income (18%)
4. Being made redundant (17%)
5. Health and social care costs (14%)
6. Not saving any money (13%)
7. Getting into debt (11%)
8. Having to financially support children (11%)
9. Not being able to afford to retire as planned (10%)
10. Having to ask family for financial support (9%).
While financial advice can help with the immediate concerns you have due to the pandemic, engaging with financial planning with a long-term view can mean you’re better prepared for future shocks, so your plans stay on track. Financial shocks may include losing your job, becoming too ill to work, or investment values falling. While they’re unexpected, that doesn’t mean you can’t prepare for them.
So, how does financial planning during calm periods help you prepare for the next crisis?
It starts with setting out your goals…
Financial planning doesn’t start with looking at your assets, but what your goals are, what’s important to you, and understanding your priorities. This may include thinking about what brings you happiness now, or what you’d like your life to look like in 20 years. What you want to achieve will have a huge impact on the financial decisions that are right for you. So, it’s important they’re at the heart of a financial plan.
It’s a process that means your financial plan is tailored to what you want to achieve in the short, medium, and long term. You can have confidence in your ability to reach life goals, whether that’s to provide financial support to loved ones, travel more or retire early.
…then putting a plan in place
With your life goals set out, it’s time to create a plan that will help you achieve them. If you want to retire early, for example, your financial plan may include:
- Increasing pension contributions to make the most of tax relief and employer contributions
- Overpaying your mortgage to reduce outgoings in retirement
- Reviewing your investments with the view of creating an income
- Building up an emergency fund of liquid assets to provide security
- Arranging an insurance plan which is payable on diagnosis of a critical illness or earlier death.
A clear financial plan and a picture of what your future lifestyle will look like can help you stay on track and focus on what’s really important.
Finally, you consider the risks
With any plan, there are risks involved. By taking the time to consider what they are and the impact they’d have in a period of calm, your finances will be more resilient during times of crisis.
We doubt many people considered the risk of a pandemic when setting out a financial plan in 2019. However, the knock-on effects of Covid-19 are likely to be part of the risks considered, from a long-term illness affecting income to investment volatility. To mitigate these risks, you may be advised to take out an income protection policy to provide a regular income if you’re unable to work, for example. Or to have an emergency fund you can use amid market volatility if you take an income from your investments.
By taking steps to prepare for potential risks, you can have greater confidence in your financial plan. No one knows what’s around the corner, but you can still be proactive. P
lease contact us if you have any questions about your financial plan or would like help putting one in place. We’re here to help you reach your goals while guarding against risks.
Cover will cease on insurance products if premium payments are not maintained.
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.