How a Car Crash and Job Loss Made Me Rethink My Life

After being in a car accident with the children and our car written off (we are all fine), and having lost my job in the City, I was pleased I had everything in place. After a chance meet outside school NappyValleyNet asked me to jot down some of the most common elements I believe parents need to think about.

Almost all parents would agree that having children changes everything.

On top of the practical disruptions that drive a truck through everything we consider to be normal, there are financial considerations and that dawning realisation that someone else is wholly dependent on us. As parents we understand the financial commitments Junior may require today (eg. ballet/guitar lessons) and tomorrow (e.g. driving lessons), but we often do not consider “is there anything else I need to think about today?”

And this is one of the questions I’m asked time and time again by new parents, or soon-to-be parents. What my clients are really referring to are that mass of stuff like wills, insurance, potential school-fee planning, inheritance planning etc.

These are the scenarios that I tend to discuss with any new clients who have young families:

• What would happen if total income decreased for whatever reason e.g. redundancy, an accident or illness for one or both of the parents?
• Have legal steps been put in place to ensure that guardianship for your child(ren) is granted to people who the parents want? Has funding been put in place to ensure they can provide the life you would want for your child?
• Have steps been taken to protect your child’s inheritance? Mainly by accurately evaluating and appropriately planning for potential inheritance tax?
• If the home is owned is it owned as joint tenants or tenants in common (this makes a difference with estate planning).

And I speak from experience.

My lack of preparation for the unforeseen became apparent me when, after 16 years trading in the City, I lost my job in 2013. Because I now had free time thrust upon me, I did something I should have taken the time to do previously, and spoke with a financial adviser at Ablestoke Financial Planning, about steps I needed to take for my family and was so astounded by what I did not know I did not know, and how much I hadn’t done properly.

So I decided not only to take their advice, but to become an adviser myself.

And I found I had to change insurance policies, review and amend wills, change our investment strategies and, as legislation changes, we will have regular reviews from now on.

I wondered why I had not done this before?

Taking the time is the most obvious excuse. Unfortunately things only tend to become vitally important once it is too late, after all we usually go to the dentist once we have toothache, but was this the only reason? Maybe it was also the perception of financial advisers?

Were they not just commission earning sales people?

In 2013 the financial advice industry went through the biggest shake up in its history. The Retail Distribution Review (RDR) implemented in January 2013 delivered widespread changes to the way businesses in the retail investment advice market operate. Costs and fees are now transparent, advisers cannot earn undisclosed commissions from investment advice, and advisers are now required to have a minimum diploma qualification standard which previously had not been the case.

The good news is that this means that it’s very clear what any financial advice will cost you, the bad news is that you often have to pay this yourself as financial advisers are no longer able to “hide” their costs in amongst the investments that you make.

So what should a typical SW London family have in place to protect themselves?

Well if you have a mortgage, where one or both parents work and you want to adopt similar protection for both parents, we’d typically look at the following:

1. life insurance to cover the mortgage in event of death of one or more parents
2. life insurance to cover any costs of raising your child(ren) if one parent is left on their own and so less able to work, or for any guardians if both parents die.
3. critical illness cover ideally which would cover the mortgage
4. income protection for one/both salaries
5. Family income benefit to deliver a tax-free income until the children are past university age.
6. Estate planning for inheritance tax – this is very important bearing in mind the value likely to be tied up in your home
7. Some form of inheritance tax planning around your pension, the 2015 budget has made this a very effective vehicle for inheritance planning

What we’d then recommend would be an annual review to revisit the plans you have in place in light of any changes in your income and costs.

The value of pensions and  investments and the income they produce can fall as well as rise. You may get back less than you invested.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Estate and tax planning are not regulated by the Financial Conduct Authority.

For further information, please contact Jaips Rekhi (jaips.rekhi@ccfpllp.com) tel: 0782 610 1718

Help in choosing a financial adviser: https://www.moneyadviceservice.org.uk/en/articles/choosing-a-financial-adviser#how-to-find-a-financial-adviser

NOTE: I did not receive or pay a fee for this piece and am not in a commercial relationship with NVN.

Jaips Rekhi DipPFS Financial Advisor