Financial planning case studies
Without revealing too much about existing clients, we have documented a few case studies of different financial planning we have dealt with. Read these to gain an idea of real life situations where we can help plan for the future.
Case study: Saving for the next generation’s education
Danny, business owner (aged 37)
This client of ours has been building an investment fund for two years now, saving for his children’s university fees.
Danny is a successful young entrepreneur who has set up a new media company here in Thailand and has excess money each month. He is British but now lives in Chiang Mai, Thailand where he is married to a Thai national and they have a baby son and another due in October 2007. Although they have a mortgaged property here and a business with a generous goodwill value, he wishes to invest money offshore to mitigate devaluation of the Thai baht and risks posed by future potential financial crashes.
Danny is relatively young compared to most our clients and has no lump-sum saving to invest, but he does have time on his hands and by starting early we are able to devise a plan that will mature nicely over a 15 year period. He began contributing £500 per month in October 2004, and the funds we have directed has seen some good positive gains. By the second quarter of 2007 the portfolio had achieved a value of £17,350 from total contributions of £14,500, equivalent to a net gain of more than 12 per cent per year (remembering that the total contributions were drip-fed into the fund at £500 per month).
Danny’s aim with this fund is to be able to pay for his children to attend university in the UK. Annual costs for a normal university, inclusive of living costs, would be approximately £13,000 per year. With two children each spending at least three years at university the total cost would be £78,000 today.
Danny’s fund is set to mature in 2020 when his eldest will be 15. At an estimated growth of 10 per cent p.a. (based on a mean 50 year average posted by the portfolio) the investment will be valued at £150,000, which we conservatively estimate, assuming inflation at 5%, would be equal to £80,000 in today’s money. The plan is flexible enough to allow Danny to draw down from the funds to help pay for the final years of an International School education if he chooses, or for any other unforeseen circumstances.
Speak to us about planning for your children’s education fund.
Case Study: Restructuring
Anton: retired school teacher (aged 66)
Anton was a client of a well known European ‘private bank’ when we met him. He had retired from Austria where he had been a school teacher at a private school. Some unfortunate timing with the dot.com bubble and some personal diversions meant that Anton was now struggling to make ends meet. With only a modest pension income (taxed in Austria) his investment income was not managing to make up the short fall. Long term this meant that even modest inflation would quickly erode both his capital and his living standards.
Anton’s investment portfolio was surprisingly invested almost entirely in bonds yielding at the time around 3.5%. For the privilege of holding these bonds, which were simply bought and held to redemption, he was being charged 1.5% a year.
Anton’s investment was restructured to target greater returns and with the objective of providing sufficient growth to allow a comfortable standard of living that would keep up with inflation.
The result of this means that instead of now spending capital to make up his income shortfall, he now enjoys a comfortable income and a growing capital value of his investment.
Anton does not have anyone who is directly financially dependant on him. He has nominated 4 beneficiaries to his estate who will receive their inheritance directly, without having to go through the probate procedure and in full.
Speak to us about how we can help you get the most out of your retirement savings.