Wednesday, 1 June 2011

Why School Fees Advice is so unique

The first question many new and prospective clients ask is, what is school fees advice, how does it differ from any other type of financial advice?

The reason people ask this question is obviously to understand "what it is" but of course also, because they have certain assumptions that they want clarification on. Many people back up or clarify their first question with, is it some sort of savings product.

That always causes me to smile a little mainly because the reference to "it" is so less product related when it comes to school fees than many other generic forms of financial advice. The "it" I say, is purely a service which helps you to manage the cost burden of school fees through to completion.

There is no "it" in terms of product simply because every person comes with a different situation and requirements.

In a previous life, as an investment adviser people would come to you with broadly the same circumstances, they had some money, be that recently acquired or an existing portfolio. They wanted me to look after, give them advice about how best to manage these funds which broadly speaking ends in a closely similar vein of advice. Assuming they have the suitable time frame, disposable income and attitude to risk I would invest the money.

The key difference is in the importance of the possible outcomes. While nobody wants to lose money very few investors properly understand the relationship between the fundamental process of investing and possible outcome. As a result, many many investors (retail investors) achieve what they perceive to be a poor investment experience.

When investment values are going up and up individual investors can all to often pay only lip service to the folly of a sentiment driven market. When that sentiment drives prices values down that is when they start jumping up and down, even though they new that it CAN happen.

So as an investment adviser the service you are providing is much harder to define given that you are mainly just investing money and then explaining each year why you think values have gone up or down...

Fortunately it is many years since I became a school fees adviser so my focus is now much less on the underlying investments themselves. I outsource the investment to either a discretionary fund manager or to a asset class manager (sometimes incorrectly referred to as passive manager).

The service I provide to clients is firstly to help them understand the likely total cost of their children's' school fees, secondly to help them identify without any intervention from me how close they are to realistically achieving the school fees ambitions and finally to show them the areas on which we can focus to improve the management and payment of their school fees long term.

This has nothing to do with next years ISA or the value of their pension (Both of which will potentially be important later in the advice process) but rather will they have enough money to pay their school fees?

That is why I find the job so interesting and why it is so much more than "where do I investment Great Grandmother's inheritance?"

Once you understand the path of achieving their school fees commitments then as a financial adviser you consider the specific elements of savings, investments, pensions, mortgages, insurance etc.


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