The most important question in financial planning

When I’m out and about and people find out I'm a financial adviser, they often ask the same thing: "Ah, do you do pensions? Do you do Bitcoin? When’s the best time to invest?"

I understand why - that's what most people think financial planning is about - picking the right pension, the right investment, the right fund and knowing what the next ‘big thing’ in investing is going to be and when to buy into it. When someone comes to see me, they often open with a version of the same question: "Is my pension ok?"

The truth is, it’s not really about if your pension's ok. What matters is whether you're ok.

And this is where I think it’s helpful to think about retirement as two doors.

Behind Door 1 is the path where you run out of money, and end up relying on your family or the state to support you.

Behind Door 2 is the path where you've got financial independence - enough to do the things you want to do, and help the people you want to help, for the rest of your life.

Almost everyone I meet wants to go through Door 2, but very few have actually stopped to ask themselves which door they're currently heading towards. That's the job of a financial planner (among other things) – it’s not picking funds, it’s working out which door you're on track for, and doing something about it if it's the wrong one.

There’s one caveat to this however: there's nothing wrong with running out of money through Door 1 – if it’s planned. The aim isn't to hoard money you'll never spend. The goal is to have enough to last your lifetime, and not to leave a pile behind you never got round to enjoying. It's getting that balance right that’s the difficult bit: spending what you can while making sure you don't run short, which is this is exactly what good financial planning is for.

You don't need to know the questions

I don't expect you to walk in already knowing what to ask. Most people don't. You might have a vague sense of "Can I afford to retire?" or "When might I run out?" or "Will I actually be ok?" That's enough. Those questions, as fuzzy as they might feel, are the ones that matter. Everything else - which investments you hold, how they're structured - sits underneath that, in service of it.

This is actually the opposite of what most people expect. We're conditioned to think the fund is the whole story - that if you just pick the right one, everything else falls into place. It isn't, and it doesn't. The fund is the fuel. The plan is the engine. Fuel matters, and you want good fuel, but it's the engine that decides where you actually end up, how efficiently you get there, and whether you run dry before you arrive. Pour the best fuel in the world into an engine that isn't built for your journey, and you'll still end up somewhere you didn't intend to go.

I'll say this too: I'd much rather work with a firm that starts by asking about you than one that starts by talking about products. A while ago I spoke to the son of one of my clients, based in London, who was getting a second opinion on his own planning. I asked him one question: were they asking about him, or just handing him information about his pension and investments? They were asking about him. That's a good sign, regardless of who you end up working with. A firm doing proper cash flow modelling, built around your life rather than around a product, will generally serve you better than one competing purely on the cheapest fund.

What happens when markets wobble

Clients often worry that a bad year in the markets means their whole plan is at risk. In my experience, it rarely does.

Good long-term modelling gives you a glide path - a general sense of where you're headed over decades, not months. One difficult year doesn't usually change that picture. It typically takes a sustained run of poorer years to meaningfully shift the outcome, and even then, we'd expect to see it coming and adjust well before it became a real problem.

Even through periods like Covid, clients with solid cash flow plans in place could see that the numbers still held up. Short-term market movements can make life feel uncertain right now, but the honest answer is that they rarely change how things look 30 years from now. That's a topic worth its own conversation another time.

So, which door?

Next time you catch yourself wondering whether you've got the ‘right’ pension, try asking a different question instead: which door am I currently heading towards?

If you're not sure, that's exactly the conversation worth having. Contact us today.