Financial Planners (New),
Overview
Durell’s new financial planners are based on an Excel spread sheet (i.e. they
require you to have a copy of Excel installed on your PC). All 32-bit versions
of Excel are supported from Excel 2003 onwards, and even Excel 2000 may work to
a limited extent, but is not supported. No 64-bit versions will be supported
until late 2011, at which time the entire program will cease to be dependent on
Excel. Until then for optimum graphic presentations you will need a recent
version of Excel, e.g. Excel 2007 or later. To start the new Financial
Planners click the “Planners” button on the Fact Find Menu, shown below.
Key
Concepts
·
The financial planners automatically load data from a selection of data
fields in the factfinds
·
You will find all of these data fields in the latest revision of the
“Planners” factfind (e.g. “Planners (rev 6a)”, shown above, which has since
been superseded by “Planners (rev 7b)”, etc.)
·
Durell factfinds are user-definable, so you can cut & paste these
“Planners” data fields into your own factfind layout
…alternatively…
·
You can enter data directly into the financial planners without using the
fact finds (right-click any spreadsheet field to edit it)
·
The planners are based on an Excel spreadsheet, where plans with
different data may be saved as xls files
·
Such saved plans may be stored in the client’s document viewer, or
converted to Adobe pdf files for emailing
So
you can start a plan from a client’s fact find, then edit it (e.g. for a
different inflation rates) and save each one to create a range of “What if”
scenarios.
Provisos
·
The Excel files created by the planners only work in conjunction with
Durell (i.e. you can only export printed copies, and cannot run them on a PC
without a copy of Durell installed)
·
The planners are based on a number of rates and assumptions, both of
which you can override, as shown below
·
The rates will be kept up to date by Durell Software Ltd through
automatic updates via the Internet
·
So for example, in the fact find you enter gross salary, which the
planners automatically convert to net salary after tax & NI
·
The planners are supplied to Durell customers as an optional tool, whose
use is at the sole responsibility of the user
·
Whereas most rates will simply be the current ones published by the
government, the “Annuity Rates” and “General Options” deserve special mention…
o The “Annuity Rates” will be
updated by Durell and are actual ones currently on offer from certain Life Insurance
companies, which you may edit for a specific provider
o The “General Options”
include fields for…
§ The overall duration of the
plans, which will default to 10 years after the chosen year for retirement
§ The assumed inflation rate
(as entered in the fact find)
§ An “Additional Debt Interest
Rate”, where debt is modelled as follows…
·
Take money from the current bank account till the overdraft limit is
reached (e.g. at the overdraft rate specified in the fact find)
·
Then take money from the credit card till its limit is reached (e.g. at
the credit card rate specified in the fact find)
·
Then take money via a consolidated long term loan (at the “Additional
Debt Rate” specified on the Setup screen, above)
§ The proportion of joint debt
to be settled by the two lives
§ A figure for unspecified
“Disposable Income” for each life, which could just as easily be set via
expenditure on “Luxuries” in the fact find
Methodology
The
planners are based on the following methodology…
·
The client has assets and liabilities which will increase or decrease in
value according to their specified growth rates (e.g. houses might be +9% p.a.
while cars might be -10% p.a.). Where a growth rate is not explicitly specified
the system will use the overall inflation rate (see illustration, above).
·
Enter the client’s GROSS income from which the system will automatically
deduct tax and NI. Also enter expenditure, which is all done after tax.
·
Enter the client’s life insurances and pensions with expected growth
rates and retirement targets. For each existing income-related pension enter
details of the associated income (e.g. the client may have received an income
from the army or NHS ten years ago)
·
Life cover will only be required if debt would remain after the sale of
assets. The system assumes a single person’s home will be sold on death so life
cover won’t be required, whereas once married the system will assume that
person’s home cannot be sold, so life cover most probably will be.
·
There will be no pension shortfall unless you specify an actual pension
requirement, for which the factfind will suggest the sum of “committed” or
essential expenditure.
·
The system follows a three-stage methodology regarding “Surplus Income”,
which typically would be…
1. To pay off the credit card
in full ASAP
2. Then to pay off any
overdraft in full ASAP
3. Then to invest any surplus
in the Current Bank Account at its savings rate, which you should adjust in the
factfind to reflect your preferred type of saving scheme…
Note
that you can also change the priority of these (e.g. to pay off the credit card
before or after the current account’s overdraft), the target account to use,
and the amount (e.g. to pay off the entire negative balance or just a
percentage).
Review
Figures
To
review the annualised figures as entered in a spreadsheet like that shown
above, click the “Yearly Breakdown” button at the top-right of the Planners
spreadsheet and you’ll see a list like that shown below…
The
Graphs
Once
you are happy with…
·
The client’s data, as displayed in (and editable from) the Planners
spreadsheet
·
The setup of rates for taxes, inflation and annuities, etc, (editable via the “Setup” button)
·
The yearly breakdown figures (viewable via the “Yearly Breakdown” button)
…you
can use the remaining buttons on the top of the spreadsheet to view graphs
showing…
1. Net worth (i.e. the accrual
of net wealth over time, including pension funds)
2. Lifetime Cashflow (i.e. the
net in-flows and out-flows each year, which after retirement will be a negative
drain on the pension fund)
3. Inheritance Tax Liability on
death (i.e. amount of inheritance tax due on future death)
4. Life Cover shortfall (i.e.
amount of liability on future death, not covered by saleable assets or life
insurances)
5. Pension Shortfall (i.e.
difference per year between required pension and current pension projection)
…each
of which is discussed in a separate Help section.