Case studies
MICHAEL AND ANDREA JONES
OVERVIEW
Michael is an executive for a major oil company and earns £180,000 pa with a bonus of £30,000.
Married with three children (aged 16 to 20), Michael is 53 and happy to work until 65, the normal retirement age under his company pension scheme. However, he is increasingly feeling the pressure of his job and recognises that it is not sustainable in the long term. He would like to achieve a better work/life balance and to that end would like to start up his own business consultancy and to have a greater degree of control. He expects to earn £75,000 in his first year and then £100,000 pa in today's terms until 65. He is concerned that the family can continue to enjoy their comfortable standard of living given his lower level of future earnings.
CURRENT SITUATION
Salary £180,00 with bonus of £30,000
Deferred final salary pension benefits £45,000pa
House worth £850,000 with £50,000 remaining mortgage (repaid within 5 years)
£150,000 of invested assets (£100,000 in PEPs/ISAs and £50,000 in building society accounts)
School fees of £9,000 for the two younger children (aged 16 and 18). University costs for eldest child at £6,000 pa
THE PLAN
Michael wants to know whether he can afford to leave his current job and start on his own. Together with his wife, Andrea, he met with one of our certified financial planners and during the course of the initial meeting their goals and objectives were reviewed.
In order to understand and quantify what investment risk means to them we asked Michael and Andrea to both complete a psychometric risk-profiling questionnaire. This enabled us to gauge the maximum level of investment tolerance that the couple would be comfortable with in order to achieve their financial goals.
With the aid of a sophisticated financial software programme we calculate the return required on their investments in order to achieve the required goal.
We were able to demonstrate to Michael and Andrea that Michael could achieve his required change in job without impacting on the family's standard of living.