Career changes? A perfect time for financial planning

There’s a mildly famous story of an accountant for one of the big global auditing firms, who sent round a lovely farewell email to everyone in his London office, speaking about how excited he was to be moving to a fast-paced role in a world-renowned bank with over $600 billion in assets. He sent the email on Friday afternoon, 12 September 2008. Unfortunately for him, on the Monday, Lehman Brothers Bank collapsed. He never even had a chance to go into the building for his first day of work. I happened to be working at the same auditing firm at the time and I’ve always wondered what happened to that fellow.

Changing your job comes with a great deal of uncertainty, even if your new company doesn’t collapse: Will the new role work out? What’s the new firm culture really like? Will you fit in? Will you grow, learn, and enjoy it once the imposter syndrome subsides?

Having a trusted financial planner at your side can help reduce this stress and ensure that you’re not so caught up in the recent changes that you forget to consider the wider picture.

Here are some things to consider before, and while, you make the big move.

Have a contingency plan

What’s your Plan B? What if your new job doesn’t work out? Do you have adequate cash reserves to fund you through if you need to move on again quickly?

These contingency plans are essential even when you’re not planning on a big career upheaval, because you never know when that decision will be taken out of your hands. No one likes to think about it, but you could be made redundant, you could suffer a long-term illness, or have an accident that prevents you from being able to work for an extended period of time. The UK’s statutory sick pay is just short of £110 per week, and long-term state benefits aren’t generous either.

Ensure you have sufficient and appropriate insurance to cover critical illness or unemployment – especially if you have a spouse, or dependents who could be impacted too.

Long-term career and life plans

If you’re changing job, it’s likely to be because you have a plan for your career. A vision of where you want to be in 5, 10, 20 years’ time. What about beyond that? Are you thinking you’ll keep working at your current pace until you’re cremated, or is a scaled back work week or the option to take earlier retirement in your vision for the future?

Don’t get so caught up that you forget to plan for your life beyond work as well. Once you’ve designed a vision for your life, your finances should be aligned with your goals and plans. That means your pensions and other investments should be in portfolios that are most suited to meeting your needs.

See also: Retirement planning: How to prepare financially for a stress-free future

Progress to date with your pensions and investments

Where have your previous jobs left you on your path to reaching your long-term lifestyle goal?

• Very few of us (outside the public sector) can leave responsibility for retirement funding to our employer
• If you’re self-employed, then it’s entirely up to you.

Typically, while you’re with an employer, they have a preferred pension provider and the co-contributions from the employer are a great boost to your retirement savings, so that’s almost always worth taking them up on. But then when you leave that employment, it’s often necessary to take a long, hard look at the pension pot.

There are lots of ‘vanilla’ investments offered by large institutions and their product salesmen, but a skilled independent financial planner will spend much more time getting to know what makes you tick and what you want to achieve from your career and personal life, so that they can create a coherent overall strategy (a financial plan) and then find the investment(s) that best align with this.

Small changes add up quickly – the wonder of compounding

Leaving your old pensions from previous roles to gather dust happens all-too-often. But these retirement funds could be suffering far higher than necessary fees, or habitually underperforming. What does it matter, you say, a few percentage points? Here’s the impact of compounding of returns at 4% per year compared to at 6.5% per year for 20 years (4% could easily be your reduced net return if you’re paying 1.5% more in fees or other costs than you should).

From a base investment of £100k you could be over £133,000 better or worse off.

Clearly, markets are more unpredictable and the above is an over-simplification (it is always the case that the value of your investments can go down as well as up), but Albert Einstein famously referred to compounding as the eighth wonder of the world – and said that if you understand it, you look to earn it, but if you don’t, you end up paying it.

The benefit of having a professional by your side to help you to plan

Experience

There’s very little in investing and personal finance that you can’t do yourself. But that’s true, on reflection, of almost all tasks. In your role, can someone else learn to do what you do? Certainly, they can. But will they be able to do it properly, without putting in the time and effort to gain the experience and knowledge that you have? Much less likely…

The best investors are those that have scale and resources, and who devote their efforts fully to investing – not on an app on their phone or in the evenings and over weekends. You will likely make significant investment choices only on a periodic basis. With big events like retiring or selling your company, you’ll likely only do it once. A good financial planner, however, will have helped several people just like you and will have the knowledge and experience to make sure you get the best outcome to suit your circumstances.

Objectivity

One of the greatest value-adds of a good adviser is their ability to work with you as a unique individual and the help they give you to find your own blind spots or emotional triggers. It can make a huge difference to your eventual fortunes, having someone to talk through your money decisions with, who can coach you to avoid bad choices. A financial planner can help you devise strategies going forward that will keep adjusting for changes in your life and future goals, as well as factor in constant changes in tax and regulations.

See also: Your financial planner should be your wealth coach

Proactive management

A good planner can also help you with proactively designing how you take your income to reduce taxes or increase investment returns, rather than just to keep the score after you’ve played the game each year – which is often what an accountant is paid to do for you or your company.

Focus your efforts on your best work (and leisure)

Most important of all, by building a relationship with a skilled financial planner, you get to focus the bulk of your time on your changing career and evolving expertise – making a roaring success of your new role, and then spending your other time with people you care about, doing things you enjoy. You can sleep well at night, even when you’re facing a huge shift in your life, knowing that your financial future is a collaboration with a trusted adviser who will help you to stay on track.

We are an independent financial advisory firm and able to offer “whole of market” advice. Let our experienced financial planners guide you through these turbulent times and light the way to a secure future.

Email duncan.bw@sableinternational.com or give us a call on +44 (0) 20 7759 7519 (UK) or +27 (0) 21 657 1540 (SA) to get in touch.