Do You Really Need A Retirement Financial Planner?

Retirement planning can be hugely complex. What should be relatively straightforward – making sure you’ll have enough money to live off and pass on to future generations – can be anything but. Even trying to replicate what a qualified financial adviser has done for you in the past year can be fraught with danger.

We’ve recently had to help a client who tried to do their own thing and incurred a tax charge, even though they were just copying the strategy we had used the year before. And before you think you can always use AI as a backup to doublecheck or to iron out any problems, you might want to think again. We’ve also had examples of AI repeatedly giving the wrong answer, even when challenged.

The short answer to the question? No, you don’t ‘need’ to have a financial adviser help you with retirement planning. But you really do need one if you want the best chances of keeping as much of your money as possible to live as well as you can.

Why is retirement planning so complicated?

There are various allowances and ways to organise your money that can have knock-on effects in other areas if you’re not careful. Do things like carry forward, tapered annual allowance, money purchase allowance, lump sum allowance, and LSDBA (lump sum and death benefit allowance) mean anything to you?

• If you don’t know what they are, you could be leaving money on the table.
• If you’re not eligible for them but apply them it could cost you money.
• If you are eligible for allowances but don’t use them properly, you could be losing money.

Rules and allowances are constantly being changed and knowing how they can all be applied and in what circumstances gets complicated. Because of this, there are occasions when even the HMRC website has errors on it.

What happens if you make a mistake?

If you make a mistake, it can cost you. You could be paying too much tax because you are not aware of allowances you are eligible for, or you haven’t applied to their true extent. You can also be penalised for claiming something you’re not eligible for.

The client we mentioned earlier tried to claim the same allowance we had claimed for him the previous year – not realising that it was no longer valid. This meant he incurred a tax charge. Had we been advising him, this would not have happened.

Why can’t I use AI to advise me on financial planning?

In theory it sounds great – AI should be able to run its own searches when you ask a question and come back with the information you need. The problem with this is that you only know if you’ve been given the right answer if you already know the answer.

We tested this by running a question related to retirement planning through an AI tool. It gave us an incorrect answer so we challenged it - but it still insisted its original response was correct. The second time we challenged it, it did actually come up with the right information. But if you don’t know the right questions to ask, and whether or not the answer is correct, it’s difficult to be sure you’re doing the right thing.

The rules change and so do your circumstances

Tax guidance changes and you will need to take this into account each year as you head towards retirement. Your circumstances are also likely to change over the years and these will need to be addressed in your financial planning too. As we’ve seen, just doing what a professional did previously doesn’t work year on year because there are so many variables. AI can give you its best guess based on the information it finds and chooses to use – but again, it’s not a reliable source.

You need to understand all the ins and outs and the nuts and bolts of retirement planning to do it effectively. If you don’t, trusting a confident, plausible response to a question, or simply using a strategy that’s worked before, can backfire.

How does a financial adviser actually help?

It’s not just that a financial adviser knows and understands the rules and allowances available to save you money. It’s that they also know what questions need to be asked in the first place. Don’t forget, unlike AI, we are regulated and therefore accountable for our answers and giving you the right advice. If you’re planning for retirement, you don’t want to make the sorts of mistakes that could limit how much you can enjoy it.

We offer a no-obligation consultation, so why not get in touch? If you’re already working with us, don’t forget to make time to review your finances with us, especially if your circumstances have changed. We are located in Theale, Reading, if you’d like to meet us in person, but we work with our clients remotely too. Remember, it’s never too early to start planning properly for your retirement!