Simplifying complex finances and creating sustainable income

At a glance

The client

A senior investment professional in his early sixties, married with two adult sons.

Financial position

Approximately £5 million of household wealth spread across several pensions, direct shareholdings, ISAs and other investments.

The trigger

Retirement was already under consideration when redundancy accelerated the decision.

The objectives

• Maintain the couple's existing lifestyle
• Generate approximately £20,000 a month after tax in retirement
• Simplify a fragmented financial structure
• Support their adult sons where appropriate
• Plan for future healthcare needs
• Retain long-term flexibility and consider the next generation

Twelve months later

• Regular retirement income broadly in line with the original target
• Multiple income sources coordinated through one central cash structure
• Pension arrangements across eight providers reduced to four wrappers across two platforms
• His wife's pension activated
• Healthcare cover reviewed and replaced
• Specialist tax support introduced
• A new private-equity allocation incorporated into the financial plan
• The wider investment risk and liquidity strategy adjusted accordingly

Why David sought financial advice

“David” is not the client's real name.

He had spent more than thirty years in senior roles at global investment firms in the City, most recently as a managing director responsible for a substantial business division.

He was, by his own description, “relatively financially savvy”.

Managing his own financial affairs was different.

Over the course of his career, David and his wife had accumulated five or six defined contribution pensions with different providers, a smaller defined benefit pension, two significant direct shareholdings linked to current and former employers and ISAs that had not always been fully funded.

None of those arrangements was necessarily problematic in isolation.

Together, however, they no longer represented a coherent plan for the stage of life David was approaching.

He had previously appointed another financial adviser because the demands of his career left little time to manage his personal finances properly.

Eighteen months into that relationship, two things concerned him.

First, he felt the conversations were increasingly focused on bringing all of his investments together under the adviser's management.

Second, the adviser charged an ongoing percentage of assets.

When David considered what that percentage could mean across his total portfolio, his estimate was somewhere in the region of £30,000–£50,000 each year.

His reaction was straightforward:

“You must be joking.”

A friend subsequently referred him to Niche because we are independent, fixed-fee Chartered Financial Planners.

The first question was therefore not simply what we would recommend.

It was how we worked, what the relationship would involve and what David would pay for it.

Retirement changed the job the money needed to do

David initially approached us while still working.

Retirement was under consideration, but it had not yet become an immediate decision.

Within weeks, a restructure at his employer brought redundancy onto the table.

The financial question changed quickly from:

“How should I organise my finances for retirement?”

to:

“Can I retire now, and what needs to happen if I do?”

David and his wife wanted to maintain their existing lifestyle, with a target retirement income of approximately £20,000 a month after tax. He described this as roughly half essential expenditure and half discretionary.

There were also wider priorities.

Their two sons were beginning their careers, and David wanted the flexibility to provide financial support if needed.

The couple wanted to plan for future healthcare.

And they wanted to think carefully about what might ultimately pass to the next generation.

The purpose of the financial plan therefore went well beyond investment management.

Building the complete financial picture

Our first task was diagnostic.

Before recommending changes, we brought together David and his wife's assets, pensions, expected income, tax positions, protection arrangements and expenditure.

We then built a long-term cashflow model to explore how their finances might evolve over approximately forty years under different assumptions.

The purpose of this modelling was not to produce a precise prediction of their future wealth.

It was to answer more useful questions.

• Could their existing resources support their desired lifestyle?
• How much flexibility was available?
• Where might future pressure points arise?
• Which assets were likely to be needed sooner, and which could remain invested for much longer?

The analysis showed that David and his wife had ample provision for the objectives they had described.

It also highlighted a different issue. A meaningful share of their wealth was held in structures that did not reflect how they were likely to want to use it in retirement.

That became the basis for the next stage of the work.

Simplifying the financial structure

Over the following months, we reorganised a number of David and his wife's existing arrangements into a more coherent structure.

This included pensions, ISAs, a joint general investment account and a central cash hub through which investment income and withdrawals could be coordinated.

The objective was not to consolidate everything simply for the sake of having fewer accounts. Some financial arrangements are worth retaining because they contain valuable guarantees, competitive charges or other features that would be lost by transferring them.

Our role is to recommend consolidation where it improves the client's position, and to leave existing arrangements untouched where there is no good reason to move them.

In David's case, pension arrangements across eight providers were eventually reduced to four wrappers across two platforms. He was also given access to the Niche client portal, providing real-time valuations, document storage, electronic signing and secure communication with his named adviser and administrator.

The practical result was a financial structure that was easier to understand and manage. More importantly, it was better suited to the way the assets now needed to be used.

Investing with intent

Retirement does not mean every part of a portfolio suddenly becomes short-term money. Some capital may be needed within the next year or two. Some may be supporting expenditure several years into the future. Other assets may remain invested for decades.

Our investment philosophy therefore considers a client's portfolio across three broad time horizons.

Short term

Capital likely to be required within approximately two years, where liquidity and avoiding unnecessary investment risk are particularly important.

Medium term

Capital supporting broadly the following two-to-eight-year period, where there may be scope to accept some investment risk while retaining an appropriate degree of stability and accessibility.

Long term

Capital with a genuinely long investment horizon, where time provides greater capacity to tolerate shorter-term market movements.

The proportions depend on the client's individual circumstances.

For David, we structured the portfolio around these different purposes and then engaged a specialist discretionary investment manager to implement the agreed investment mandate.

That separation is important to how Niche works.

The discretionary investment manager is responsible for implementing and managing the underlying portfolio within the mandate.

Niche remains responsible for the financial plan, the investment philosophy and structure, selecting and overseeing the investment manager and ensuring the portfolio continues to serve the client's wider objectives.

If circumstances change, the financial plan determines whether the investment mandate needs to change too.

Turning accumulated wealth into retirement income

For most of David's working life, the mechanics of household income had been relatively straightforward.

A salary arrived each month. Retirement reversed that process. Now several different assets needed to work together to provide a regular, usable income.

Rather than relying on one pension or investment account, we created a central cash structure through which different income sources could be coordinated. These included pension drawdown, ISA withdrawals, dividend income and gilt income.

A regular monthly transfer could then be made into the couple's main spending account. For David and his wife, the day-to-day experience therefore looks much like receiving a salary.

The sophistication sits underneath.

Different assets can perform different roles within the wider financial and tax plan while the household receives a predictable monthly amount to spend.

Other implementation work during this period included activating the defined benefit pension, beginning his wife's pension, funding ISAs before the relevant tax-year deadline, reviewing private medical insurance and introducing an accountant with experience of complex personal tax affairs.

We also produced a concise written summary of the strategy: a one-page financial playbook that allowed the overall plan to be reviewed at a glance.

Nine months later, the plan changed

Around nine months into our work together, an opportunity arose that had not been included in the original plan.

David was offered access to private-equity investments through an alumni programme connected to a previous senior role. He understood the investments, was interested in participating and wanted to commit approximately £100,000 each year.

The question was not simply whether he could afford the investment. Private-equity commitments have implications elsewhere.

Capital calls can arise on the investment programme's timetable and may require cash to be available with relatively little notice. The new allocation also increased exposure to a higher-risk, illiquid asset. Future cashflow changed. And all of it had to coexist with the retirement income already being drawn.

Rather than treating the opportunity as a standalone investment, we adjusted the wider financial plan around it.

• Liquidity was increased so future capital calls could be met.
• Expected commitments were incorporated into the cashflow model.
• The funding route was structured through the existing cash hub, creating a clear paper trail for the client's accountant and the programme's anti-money-laundering requirements.
• Risk elsewhere in the portfolio was reduced so that the overall risk position remained broadly aligned with David's objectives.

The original plan had dealt with what we could foresee.

The next stage dealt with something we could not.

Both are part of ongoing financial planning.

Where David and his wife are now

Twelve months after first engaging Niche, David was drawing a regular monthly retirement income broadly in line with the original target.

That income was being supported by a combination of pension drawdown, gilt income, ISA withdrawals and dividend flows.

His wife's pension had been activated.

The medical insurance had been replaced with cover considered more appropriate for retirement and at a significantly lower cost.

Pension arrangements previously held across eight providers had been simplified to four wrappers across two platforms.

The private-equity allocation had been incorporated into the wider investment and cashflow plan.

And David could review the family's financial position through one client portal rather than managing multiple provider websites separately.

The plan was designed to remain sustainable rather than simply meet the first year of retirement.

David's long experience of markets meant his capacity and willingness to accept investment risk differed from what might be assumed from a standard retirement model.

His private-equity allocation was also intended to work over a much longer time horizon.

Those factors, together with future family and intergenerational considerations, remain part of the ongoing planning process.

The plan is formally reviewed twice a year and adjusted as circumstances change.

Why the fee structure mattered

The way David paid for advice had been one of the reasons he reconsidered his previous adviser relationship.

At Niche Private Clients, we don’t charge an ongoing percentage of the client's portfolio for financial planning. Our fees are fixed according to the complexity and work involved.

For David's circumstances, the fees at the time were:

Initial implementation fee: £10,000

This covered the initial restructure work, including cashflow modelling, pension consolidation, investment-platform implementation, retirement-income planning, tax planning, protection review and the written suitability report.

Ongoing financial-planning fee: £7,500 per year when David joined, subsequently £8,250 following the latest annual fee review.

This included two formal planning meetings each year, investment-manager oversight, complex tax planning, quarterly portfolio reporting, inheritance-tax review and regular access to his adviser.

Our ongoing financial-planning fees are currently exempt from VAT. There is no minimum contract, and ongoing fees can be paid directly or facilitated from investments depending on the client's preference.

For David, the distinction was important.

He wanted the fee to reflect the work being undertaken rather than rise automatically because the value of his portfolio had increased.

Financial planning in practice

David's circumstances are individual, but the structure of the work is representative of many of the more complex cases we advise on.

Financial planning is rarely one decision.

It is a series of connected decisions, made in the right order and kept aligned with the life the money is intended to support.

Talk to Niche Private Clients

If you are approaching retirement, managing several pension and investment arrangements or questioning whether your existing financial structure still suits the next stage of your life, an initial conversation with us is free and carries no obligation to proceed.

Arrange a conversation

Important Information:

This is an anonymised case study based on one client’s circumstances. It is for illustration only and is not financial advice. The right approach for you will depend on your own circumstances.

The value of investments and any income from them can fall as well as rise. You may get back less than you invest.

Income from pension drawdown is not guaranteed. Withdrawing too much, or poor investment performance, can reduce your fund and the income it can provide in future. 

Tax treatment depends on your individual circumstances and may change in future.

Private equity is a higher-risk, illiquid investment and is not suitable for most investors. It formed part of this client’s wider plan because of their specific circumstances.

Cashflow modelling is based on assumptions that may not be borne out. It is a planning tool, not a guarantee of future outcomes.

Fee figures are the client’s own estimate of a previous arrangement and are not a comparison with any specific firm. Our fixed fees depend on the complexity of your circumstances and are agreed in advance.