5 essential functions of an annual review with a financial planner

The annual review is more than just a check-up – it’s a chance for a financial planner to spend some time getting to know their clients. Read more here.

One of the core services a financial planner provides to clients is an annual review.

Annual reviews are the bedrock of a planner’s relationship with any client, providing them with a structured environment within which to form their financial plan with professional help.

If you have clients who you suspect may benefit from bespoke financial planning – particularly if they are going through a divorce, or have recently been through one – you and your clients may benefit from a deep dive into the key functions of an annual review.

Here are five essential components of an annual review with a financial planner.

1. Catching up with clients’ personal circumstances

Before delving into the details of their financial plan, an independent financial planner will sit with their clients and ask how things are going on a personal level.

They’ll often chat about:

• Changes to their material circumstances, such as moving house or starting a new job
• Any major events that have occurred in their life, such as the birth of a grandchild, the death of a loved one, or a divorce
• How life is going in general, giving them the opportunity to raise concerns or topics they’d like to talk about in this particular review.

Kicking off the meeting in this way puts clients at ease and allows the planner to ascertain how they’re feeling, what they’re interested in talking about, and what they may need help with.

In particular, for those experiencing or having recently gone through a divorce, this catch-up time is more than necessary to help them relax and open up.

2. Providing an overview of investment performance

Financial planners often encourage their clients to take a passive approach to investing, rather than obsessively checking on their investments every day , week, or month. So, an annual review provides the ideal opportunity to talk calmly about investment returns and offer guidance on next steps.

Since the pandemic, clients have been understandably concerned about market downturns – especially those who are experiencing personal turbulence too, like a divorce.

As such, during their annual review, a financial planner will cover:

• The importance of a long-term strategy for remaining optimistic and consistent
• Why any falls in the value of their investments might have occurred
• Any changes to their investment strategy in light of a divorce, including making appropriate pension sharing arrangements
• How volatility could affect their short- or medium-term plans (such as, if they’re planning to retire in the next year, or if they need to liquidate some of their portfolio in light of their divorce).

This is a crucial moment for clients to gain reassurance about their investments, particularly if their financial confidence has been knocked by a recent or ongoing divorce.

3. Reviewing any legislation that could affect the client’s tax burden

With the UK having had six chancellors of the exchequer since February 2020, many clients have found it hard to keep up with the ever-changing fiscal policies that may affect them.

This is particularly relevant in light of our recent change of government in July 2024, which could have sparked new anxieties about tax and earnings for some clients.

Some recent examples of fiscal policy changes affecting high-earning individuals include:

• The Capital Gains Tax (CGT) Annual Exempt Amount falling from £12,300 to just £3,000 between 2022 and 2024
• The Dividend Allowance being cut from £2,000 to £500 over the same time frame
• The reduction to the additional-rate Income Tax threshold, which stands at £125,140, down from £150,000 (2024/25)
• The freezing of crucial allowances and thresholds, including the Personal Allowance and Inheritance Tax (IHT) nil-rate bands, which are contributing to fiscal drag.

Clients may approach their planner with questions about these changes in their annual review – or, in other instances, are unaware of them and may not realise how their wealth could be affected.

Once again, knowing about the changes that may affect them is important for all clients, but could be particularly essential for those experiencing divorce. For clients in this situation, their financial planner will make sure to go through any changes that pertain to their unique circumstances and offer advice on how to minimise any negative impact.

4. Ensuring clients’ protection is still sufficient

Protection is a cornerstone of any robust financial plan. During an annual review, a financial planner will review the existing protection a client has in place and talk about whether they would benefit from any further measures.

They are likely to go over:

• Life insurance
• Critical illness cover
• Income protection
• Lasting Powers of Attorney (LPAs)
• Additional forms of cover like home insurance.

If the client has had to make a claim on any of their policies in the previous year, their financial planner will ensure that there are no gaps in their package of protection going forward.

5. Utilising cashflow modelling software to forecast clients’ future circumstances

One of the most valuable tools at a financial planner’s disposal is cashflow modelling software.

This technology takes in data about a client’s circumstances and forecasts what this may mean for their future circumstances. These projections may feature the age at which they can comfortably retire or how much they can afford to give their children to help them set up their own lives.

Clients benefit hugely from cashflow planning software because it uses easy-to-read graphs to display its findings. As they look at the data, their financial planner will provide step-by-step guidance so that clients understand every aspect of the forecast and what it might mean for them.

Often, after seeing their cashflow forecast, clients realise they’re closer to their goals than they thought! This is a wonderful moment of relief for those who have worked so hard to achieve financial stability after a difficult divorce.

Other times, there may be disappointment if clients realise that they may need to retire later than planned, especially after a financially draining divorce. In these moments, their financial planner will take the time to reassure the individual and help them to focus on taking positive steps towards their future goals.

Get in touch

If your clients could benefit from working with a qualified divorce expert, they can find me at lottie@truefinancialdesign.co.uk or call 07824 554288.

I am also happy to discuss cases with solicitors first, before you refer your clients to me, or you can contact me by email and CC your client accordingly. I am happy to accommodate whatever mode of communication works best for you and your clients.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate cashflow planning, tax planning, or Lasting Powers of Attorney.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts. 

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.