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Wealth Management Fundamentals

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Wealth Management Fundamentals

In our first blog of the new year, Christopher Flynn – our director – shares a breakdown of what a wealth management professional does in order to maximise their clients’ financial opportunities, as well as some quick financial advice.


From a quick chat with the driver when sat in the back of a taxi, to standing at the bar ordering a pint in the pub, after being asked what I do for a living, the question that often follows is this: ‘If I had ten grand, what’s the best thing to invest it in?’

If I was to make a recommendation at this point the suitability of my advice would be about as reliable as the great British weather. And if you were ever to receive recommendations after a 5 minute engagement, I’d worry about the credibility of the financial adviser. I’d also wonder just how qualified they really are.

I want to provide an insight into what is actually involved before a financial adviser can provide suitable advice to their clients. In order to do this, I will map out the journey the adviser and client need to go on before any recommendations can be made.

Initial Client Discussions

In this instance I will use an example of a client wanting investment advice – just like the taxi driver or the punter waving £20 in the air at the bar. However, instead of the ‘ten grand’ suggested above, I will use the sum of £100,000.

After the initial engagement with my client, where I have explained who I am and exactly what I do, along with disclosing all the really important compliance points for the clients benefit – like how I’m authorised and regulated by the Financial Conduct Authority (The FCA) and the process the client can follow if they wanted to make a complaint – I move into the fact finding stage of the journey. Here, I record all of the client’s details. This allows me to have a clear picture of their full circumstances and fully understand exactly what their aims and objectives are.

Variables of Investment

It is not always the case that the full £100,000 gets invested. I will explain more now; I firstly like to ensure the client has a sensible amount of deposit-based savings that they have instant access to. This can then act as a contingency against short-term financial emergencies – such as a car needing to be repaired, the boiler breaking down in the middle of winter, or loss of earnings through redundancy.

As a rule of thumb, I like the client to have a minimum of 6 month’s worth of their monthly expenditure held on deposit; however, up to 12 months would provide far greater security. Let’s say this equates to £12,000. As the client in question has £100,000 in total to their name, I then have to reduce the amount potentially available for investment down to £88,000.

The next thing I look into is whether or not the client has any planned spending within the next 5 years, for example a daughter’s wedding, a holiday that needs paying off, or a planned extension. Once we have established the total amount required for this spending I will also recommend that amount is left in their deposit based savings. Let’s use a figure of £18,000 for planned expenditure. I’m now down to £70,000 that is available to be invested.

Risk Management

One particularly important point I make my clients aware of at this stage is that I cannot guarantee future performance. This is because there are too many things out of my control that can affect investment markets and cause market volatility. As a result, the client must be aware that the value of their money can go down as well as up.

With this in mind the client should be willing to leave their money invested for at least 5 years, although once invested they can access it whenever they choose. This then provides a level of protection as it gives a realistic timescale for any losses suffered in the early years of the investment journey to be recovered. Once the client has been made aware of this they may get slightly cooler feet and instead of investing the full £70,000 of available funds we have established, they may feel more comfortable actually investing £50,000.

The next step in the advice process is another key fundamental of the wealth management process –  arguably, it is the most important element of providing any investment advice. This is where I understand the clients preferred risk approach and ultimately determine the level of risk the clients’ money will be exposed to. I like to explain how investment markets tend to work and the importance of taking a long term view with the investment. I don’t think it’s wise to try and time investment markets as you are likely to get caught out.

This is a bit more like gambling rather than investing. For example, if you think investment markets are going to fall and in turn take a low risk approach, the market may actually rise and you would therefore lose out on investment growth. Likewise, if you think the market is going to rise and in turn take a high risk approach, the market may fall and you would therefore potentially suffer large investment losses.

Movements in the market are inevitable, so regardless of whatever investment risk approach is taken there will be a level of investment volatility. The level of investment volatility will be more aggressive the higher the level of risk that is taken. I often suggest to clients they should opt for a risk approach they are comfortable with and can afford to take, have a long term view, and accept that there is likely to be a few speed bumps along the way.

Further Considerations

As well as having a detailed discussion with the client about the topic of risk and market volatility, there are three further considerations in helping the client determine what risk approach they feel most comfortable taking. These are:

  1. The client’s knowledge and experience of investing money
  2. Their attitude towards risk
  3. Their capacity for risk – how much risk they can actually afford to take, regardless of their attitude.

I ensure a real understanding of this by completing a questionnaire with the client. At the end of this questionnaire a result is determined where the client sits on a scale of 1 to 10, with 1 being lowest risk and 10 being highest risk. The client can then confirm whether they feel comfortable with the risk approach result or if they would prefer to amend this based on what they feel is a truer reflection of the risk approach they want to take.

Let’s use a risk approach of 6 for this client.

Diverse Approaches to Investment

Now that I know the client’s chosen risk approach is 6 out of 10. I discuss different investment strategies with them. These include passive fund portfolios, active fund portfolios, discretionary fund management, smoothed funds, ethical and responsible funds and currency hedged fund portfolios – to name but a few. I like to get a feel from the client as to whether they have any preference so I can narrow down my research.

Regardless of what their preference is, a key fundamental to investing is diversification. Simply put, this is ‘not having all of your eggs in one basket’ – ensuring that even high risk investments can’t affect the totality of a client’s assets.  When completing my research I will need to factor this in, as well as ensure the asset allocation within the investment portfolio is suitable and in line with the clients chosen risk category.

As I’m an independent financial adviser, I complete my research from across the whole of the market. Once this is done I can then make my final recommendations bespoke to my client’s needs and be confident I’m providing the most suitable solution.

Even without going into extensive detail, hopefully I have explained things well enough to help you understand some of the fundamentals that need to be considered when providing suitable financial advice. Therefore, if you do happen to be driving me in a taxi or chatting to me at the bar in future just bear this in mind before asking me ‘where should I invest my ten grand?’  Instead I’d be happy to arrange a free initial consultation with you, where I can discuss your aims and objectives in more detail whilst also understanding your full circumstances.

Chris Flynn DipFA CeFAP

Independent Financial Planner & Director

Contact Giliker Flynn Today

Founded and run by Christopher Flynn and Frances Giliker, Giliker Flynn is a wealth management company, offering financial planning, wealth management, and financial advice in Stoke On Trent, England. Our goal is to maximise our clients’ financial opportunities, so that they can make the most of their wealth.

For more information, or to book a free initial consultation, contact the team on 01782 850 590. Alternatively, you can email our director directly at and arrange a consultation today.

Giliker Flynn Independent Wealth
2 Gower Street
Newcastle under Lyme
01782 840590