What We Do
Financial Planning
High-value financial planning is the basis of everything we do.
We need planning in order to manage goal-based, outcomes driven portfolios. But we also know that good planning has the same value to a household as to a business, institution or government. To deliver that value calls for knowledge, skills and techniques that are not easily found in retail financial advice, drawing widely on economics, corporate finance, investment and the actuarial sciences. And then it needs the communication skills of top management consultancies. This costs money. But in retail advice, the wages of financial planners have been paid by solution providers in packaged insurance and investment products, so financial plans have too often been worth only what clients paid directly: nothing.
About one quarter of our annual fee income comes from high-value financial planning, separately charged for, on its own merit.
Initial Reviews
- Standalone comprehensive planning for new clients with four sequential elements delivered on an agreed time line: discovery, development, decisions and (if required) deployment
Focused Advice
- Limited (for instance) to a pension need, such as the contribution strategy, vesting strategy, or consolidating multiple pension plans in one trust
New Financial Planning
- Likely to be for existing investment management clients
Developing investment mandates for family trusts:
- Working with trustees and solicitors to clarify objectives and identify possible conflicts between objectives
- Developing equitable, robust solutions to address conflicts
- Determining an optimal investment approach and strategic asset allocation
- Developing a framework for risk management
- Developing an explicit portfolio-manager mandate
Because we need comprehensive planning to provide the terms of reference for managing outcomes driven investment portfolios, we try to keep the price below its intrinsic economic value to clients, at a typical cost of around £5,000.
What makes No Monkey Business planning ‘high value’?
Its focus is people: our clients and their families. Its scope is all the different aspects of their lives that in any way involve money. Its objective is always the best interests of our clients, untainted by any agenda conflicts. But its discernable value is in delivering a formal structure for easy, effective and appropriate decision making, recognising that financial decisions will be made in conditions of unavoidable uncertainty. An immediate benefit is obtained if planning changes clients’ experience of uncertainty, such as in greater clarity, confidence and consistency. Its long-term benefit is in outcomes that are significantly better than when clients’ own and delegated decision making is not well-informed and skilful. Defining at the outset what ‘better’ means is one of the objectives of the discovery and development stages of an Initial Review.
For us, a key to delivering high-value planning has been to develop with clients a structure of different goals, as jobs for their money to perform, so that we can then apply ‘utility’ theory to each of the financial goals. Utility, often referred to as ‘welfare’, describes the different ways in which people perceive the benefits of their wealth and expect to derive those benefits, which in turn helps to define what denotes a satisfactory outcome. Planning needs to define the goals, describe and quantify their outcomes, assign resources between them and identify how the risks involved are to be managed.
Risk management is as vital an element of planning for households as businesses. Individuals confront several sources of uncertainty: catastrophe risks, inflation, economic or business risk, longevity and morbidity. Some can be avoided as a matter of choice but otherwise the solutions are limited to insuring (including hedging) or else embracing, and managing, the risks. Planning must deal with these options holistically, across the entire household balance sheet.
What results from a utility approach to individual goals and across all goals is the maximisation of capital efficiency. It requires complete consistency between resources, desired outcomes and risk taking activity. Though clients depend on us to quantify outcome probabilities, using sophisticated financial modelling, and to be able to spell out underlying economic realities (sometimes inconvenient), it also calls for the full engagement of clients and is as far removed from blind trust and dependency as consulting can be.
Other outputs of planning are less dramatic but important nonetheless and may compound over time: tax efficiency (including the optimal use of tax-favoured products and product wrappers) and cost effectiveness. These may involve an audit of planning clients’ own existing arrangements to identify savings and efficiency improvements. But in many respects optimal decisions about tax and costs rest on analysis that is applicable to all clients, such as calculations of net present value after tax (such as for pension contributions) and evidence-based preferences between active and passive investment management.
Economic realities likely to provide unexpected planning insights:
- Living off capital is more efficient than generating income
- Living off income is not economically different from consuming part of the capital
- Nominal returns are mainly inflation compensation but this gets taxed as if real economic value
- Pension fund tax breaks are not the full story and there are plenty of losers from the pension trap
- ‘Investing’ in occupied properties is more about consumption than investment
- Renting property is not intrinsically better or worse in the long run than renting money
- But it takes particular conditions to make it optimal for the young to gear up their overall balance sheet
- Avoiding all risk is only affordable for the ultra wealthy but is then likely to conflict with other objectives
- In a limited ‘budget’ for bearing all forms of risk, inflation bets like bonds are the least rational risk to retain
- Equity risk is the most rational to bear and most other risky assets are derivatives of it
- But equity risk does not decrease with time, as most advisers claim
- When accumulating risky assets, you should wish for bad markets rather than good ones
