Mr & Mrs Smith were referred to me in 2008 by Mrs Smith's parents whom I acted for. Mr Smith was moving jobs and his new position did not offer employee benefits such as life or critical illness cover and he wanted advice on this. Mr Smith had some insurance plans put in place that met what he felt he wanted and could afford and that would provide his family a sufficient agreed level of cover in the event of death, illness or incapacity. In 2009 and 2010 I offered Mr & Mrs Smith an 'annual review' and each time they kindly wrote back saying everything was OK and declining my offer.
In early 2011 Mr Smith called me about an unrelated tax issue and the setting up of a limited company. His new position from 2009 had not turned out as expected so he was going it alone. As I am affiliated to a firm of accountants I referred him to one of my accountancy colleagues who was able to help him set up his limited company.
This is a real life case study. Names and some other details have been changed to protect confidentiality.

After Mr Smith had set up his limited company I sent him an email but this time it was not related to an 'annual review' it was
related to cashflow planning that I had really got to grips with over the preceding six months. This is what I sent: "Good to talk to you again. As mentioned we could look at your (whole family) cash flow and lifestyle planning that brings together all of your finances so you can see how these might look now and in the future (at anytime) based on aims and objectives. This process is a really good way of factoring in lifestyle goals vs. finances and assessing if you like what you see for the future. We can model almost any scenario so you can see how you might want to plan for the future."
A few weeks later Mrs Smith emailed me back:
"Many thanks for your email, it was very good timing actually as we have a few things that we would like to discuss with you!"
It was very interesting for me to see that Mrs Smith had replied to my email and not Mr Smith. There had to be a good reason for this. Prior to our meeting I sent Mr & Mrs Smith an expenditure questionnaire covering expenditure and lifestyle. I also asked them the following questions:

• What do you really want your finances, assets, income etc to do for you?
• What income do you need to do all the things you want to do now and in the future?
• What aims and specific goals do you have? – both personal or finance related.
• What is your one, major, overriding financial concern for the future?

They sent all of the information back,hard and soft facts. I went through all of these and entered them, where relevant, into the cashflow software.
Mrs Smith said that she completed the expenditure questionnaire and was astonished where all their income went. They said to me that they had never looked at what comes in and out. Mrs Smith commented the spreadsheet itself was a very salutatory experience!
{desktop}{/desktop}{mobile}{/mobile}
Mrs & Mrs Smith wanted to be able to continue their lifestyles in terms of spending for the foreseeable future but Mr Smith did not want to work past the age of 60. Mr Smith was aged 53 at the time and Mrs Smith was 47. They liked where they lived and had no intentions of moving. They were both in good health and were not factoring in big inheritances from either set of parents.
Mr Smith had always worked in IT sales and Mrs Smith looked after their family of two children aged 13 and 10. Mrs Smith had a very small paid-up PPP from a short employment stint before they got married some 15 years ago. She was not intending to go back to work in the near future.
Mr Smith was hardwired to wanting to pay off their interest-only mortgage on their property. This came up repeatedly in our discussions as he wanted to provide a debt-free and secure home for his family.
Mr Smith has a very good deferred final salary scheme that by the age of 60 (NRD) will be valued at close to the new LTA. He has the option to take this at the age of 55 actuarially reduced but with the provision of tax-free cash that could pay off their mortgage. A guaranteed pension income would be payable from this date too. However the residual pension alone would not be enough to meet their needs. They also wanted to be able to give their children lump sums for house deposits at the age of 21 and they wanted to be able to help with the costs of tertiary education for each should this arise.
Both Mr & Mrs Smith wanted to be able to continue their spend on expensive holidays the cost of which would actually go up when Mr Smith stopped work and until at least he reached 75 when they may go down.
They both have cash reserves that looked adequate for any emergencies and their life, CI and Income Protection cover should help out should any unpredictable lifestyle disasters occur.
On looking though their cashflow through mortality of 100, it was clear that they were not going to be able to do the things that they wanted over the next 10 years let alone into later life unless Mr Smith worked through to at least 65 on his current earnings. This was scenario one.
For scenario two, I modelled the option for taking an actuarially reduced pension for Mr Smith at 55 with the repayment of the mortgage coupled with saving the expenditure for this and saving the net of tax final salary pension in an accessible investment vehicle, again through to the retirement age of 65 for Mr Smith. When Mr Smith reached 65 this investment vehicle could be used to supplement their joint income.
When we met to discuss their Financial Planning I started with scenario one. I was able to present this in numerical and graph form on the large plasma TV screen we have in our meeting room. Mr & Mrs Smith understood the implications of what I presented and what they were (over) spending and the cost of their current and planned lifestyles.
We then looked at scenario two showing the repayment of the mortgage in the shorter term using the final salary pension benefits and saving the excess income this generated.
They could both see that they could pay off the mortgage if they wanted and they could see how this action might influence their finances going forward – so suddenly the mortgage became less of an issue to Mr Smith as he could see he had control over it!
At this time I could see a 'light bulb' moment for Mr & Mrs Smith. Mr Smith said that he was currently negotiating a new employed position with a company he was contracted with via his own limited company. This would give him access to shares in the business he was looking to join and bonuses for hitting sales targets. He also had shares in a non-listed company that he had worked for in the past and these might be listed in the next 18 months or so for sale.
Mrs Smith was worried that this change might not give them enough income and assets for the future. These were the real issues it transpired and the reason why she answered the original email I had sent rather than Mr Smith.
So Mr Smith had a disturbance of a new position and he was concerned about the one thing that mattered to him – security for his family and the paying off of his mortgage. But this was not the real concern as I showed that this could be covered, if he wanted.
{desktop}{/desktop}{mobile}{/mobile}
Both agreed that as Mr Smith works in a very stressful industry that he would actually might like to slowdown or stop work altogether from 58 not 60! Mr Smith said that he might not actually stop work at 58 but he would like to be in the position to choose what work he did on a consultancy basis without feeling forced to work.
They asked me to look at a third scenario that I was able to create during our meeting which was based on whether Mr Smith would want to slowdown or stop work at 58-

• What salary should Mr Smith negotiate now?
• What level of annual bonuses should Mr Smith look to target to age 58?
• What value should Mr Smith look for the in shares he will get from his new position?
• What value should Mr Smith look for in the non- listed share sale over the next 18 months and what price would be good to sell at? 

By adding a variety of estimated values to all of the above I was able to show Mr & Mrs Smith how they could influence their Financial Planning for the future. In essence I was able to stress test their finances and give Mr Smith parameters to work to when looking at his new job. 
Mr Smith now had meaningful figures for his work that he could negotiate with good reason and target. He was also able to get a sense of reality into the figures that he was looking for and how these would help with their Financial Planning. In fact the figures we used meant that they could do all of the things that they wanted to do! Furthermore the figures were smaller than Mr Smith had anticipated and which he felt were readily achievable and within his control.
On going through scenario three with Mr & Mrs Smith they told me that they had never seen their finances like this and that they could spend hours looking at various options – they were very pleased and felt that they had control over what they might need to do to get to their aims and objectives. I was also able to show scenarios for early mortality, ill health and incapacity for both Mr & Mrs Smith and them individually and how their insurances would work for them. I asked them how they felt about what they could see and what their children and survivor would be left with was OK. As it happens what they have in place looked to be more than adequate for them. However, when completing the expenditure questionnaire Mrs Smith did ask if she should cancel some of their life polices and their Sky subscription to reduce expenditure! After showing them how important their life insurance plans were in real terms (as Mr Smith is the only wage earner), the subscription to Sky is likely to go as they were able to see the true value of their insurances!
As a Financial Planner I felt that I had been able to do a real job in helping Mr & Mrs Smith see their finances in a true light that is not obscured by the need to for them to buy a plan or product as and end result.

What happened next
When we conducted our next annual review Mr & Mrs Smith's planning was on track for Mr Smith to slowdown or stop work altogether from 58. Mr Smith secured the salary and sales bonuses he had targeted in his new position. The non-listed shares are yet to come to fruition and the shares in the new company are being accumulated.
Both Mr & Mrs Smith are currently saving funds into stocks and shares ISAs with an investment strategy and asset split based on what they are likely to need for the future. This is based on the results of the cashflow planning and scenario three which showed they needed to make some regular savings into a suitable investment vehicle over the next year.
I did not cure Mr & Mrs Smith's Financial Planning issues in one go nor did I attempt to give them a one hit solution for their planning – there is a lot more work to do for them over the coming years. Instead I showed them what they have and what it can do for them and what they need to do in order to achieve their aims.