16th November 2023 - Sean Banks

2 key reasons why you may want to update your plan during a financial review

Regular financial reviews may help keep you on track to meet your goals and give you confidence in the steps you’re taking. As well as reviewing your assets, you might also want to make changes to your plan.

Last month, you read about why you shouldn’t skip your financial reviews and how they could help you reach your goals. Now, read on to discover two reasons why you might want to make changes to your financial plan during a review. 

Updating your plan in response to short-term movements could harm your goals

While there are times when it’s appropriate to update your financial plan, you should be aware of the risks of responding to short-term movements or bias.

Stock market volatility can be nerve-wracking. If you’ve read about the value of shares falling, it can be tempting to withdraw money from the market to preserve your wealth. However, it could have a negative effect on your progress towards your long-term goals.

Historically, markets have delivered returns over the long term, and investors who weather the ups and downs have benefited in the long run. By taking money out of investments during a downturn, you turn paper losses into actual ones.

Of course, investment returns cannot be guaranteed and do carry risks. Understanding which investments align with your circumstances and objectives may help you take an appropriate level of risk.

Similarly, after speaking to a friend about how they’re investing in a certain asset that’s going to deliver “great returns”, you might want to follow suit. Behavioural biases, like following the crowd, could lead to you making unnecessary changes to your plan, which could harm the projected outcomes. 

Remember, your goals and circumstances are unique to you and should be at the centre of your financial plan. If changes are tempting, taking a step back to calculate what’s driving the decisions could be useful.

So, following a financial review, why might you make changes? There are several reasons why it may be appropriate, including these two.

1. Your goals or circumstances have changed

Your financial plan is built around your personal goals and circumstances. Over time, these may change, and altering your plan will ensure it continues to reflect your desired lifestyle.

Perhaps you want to bring forward your retirement date, so you increase pension contributions as a result. Or becoming a parent might mean taking out life insurance provides peace of mind, or perhaps school fees become a priority.

A financial review is a chance to tell your financial planner about changes in your life.

It means they can offer advice that’s suitable for you and your aspirations. In some cases, it could mean altering your plan so that it continues to align with your life’s goals.

2. Government changes will affect your plans

Sometimes government announcements will affect what’s suitable for you. Changes to allowances, tax hikes, and other legislation could mean adjusting your financial plan to help you get more from your assets.

The announcement that the government will abolish the pension Lifetime Allowance is a recent example.

From 2024, there’s expected to be no limit on how much you can build up in pension savings over your lifetime. This might make it appropriate to increase your pension contributions, adjust your risk level or alter your retirement date.

Keeping on top of the latest news and then understanding what it means for you can be difficult.

Financial reviews provide an opportunity for your financial planner to explain how these announcements impact you specifically. Tailored advice helps you identify potential risks or opportunities that may lead to changes in your long-term plan, to better suit your personal situation.

Contact us to discuss your financial plan

If you have any questions about your financial plan or would like to understand how we could support you, please get in touch.

Next month, read our blog to find out why financial reviews may help you reduce impulsive financial decisions and focus on your long-term aims. 

Risk warnings

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

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