A comprehensive fact-find is fundamental to good financial planning. Before we can advise properly, we need to understand the client’s financial position: their income and expenditure, assets and liabilities, pensions, investments, property, protection arrangements, tax position and the wider circumstances that sit around them.
Map 4 does not change that. Nor is it an attempt to create a more sophisticated replacement for the fact-find. It starts from something rather simpler: once we have gathered all that information, we still have to decide what it means.
There is a difference between knowing that a client has accumulated capital and understanding the purpose that capital is expected to serve.
That distinction can easily become blurred because financial planning naturally organises capital according to its financial characteristics. We talk about pensions, ISAs, investment portfolios, cash deposits and property. We consider ownership, accessibility, taxation, risk and expected return. All of those things matter, but they describe the characteristics of the capital rather than necessarily explaining why the client has it.
The more interesting question is what the capital is actually there to achieve.
For some clients, a substantial proportion of their wealth will eventually be required to support their own lifestyle. Other capital may provide security against an uncertain future, fund particular ambitions, help children or other family members, or ultimately pass to the next generation. Some may be intended for charitable purposes. Quite often, however, part of the client’s wealth may have no clearly articulated purpose at all. It has simply accumulated.
That last category is particularly interesting.
Successful clients can spend decades accumulating wealth because accumulation itself has been the sensible thing to do. They have saved, invested, contributed to pensions, built businesses and bought property. Eventually they can reach a position where the behaviour that created their wealth continues long after the original need to accumulate has changed.
At that point, simply recording the assets tells us relatively little about the decisions the client now faces.
Capital rarely has only one purpose
The position becomes more complicated because individual assets do not necessarily correspond neatly with individual objectives.
A pension may primarily be intended to support retirement, but the client may also regard part of it as a reserve they hope never to need. An investment portfolio may simultaneously represent future expenditure, financial security and an eventual inheritance. The family home provides somewhere to live, but may also represent a significant store of capital that could become relevant to later-life planning.
The planner therefore needs to understand not only the assets themselves, but the different expectations being placed upon them.
This can expose tensions that are otherwise difficult to see.
A client may want to maintain a particular standard of living, retain a substantial financial cushion, help children now, provide for future care and leave a meaningful inheritance. None of those intentions is unreasonable. The difficulty is that the same pool of capital may be expected to satisfy all of them.
The planning question is no longer simply whether the client has sufficient assets. It becomes whether their capital can realistically perform all the jobs they have assigned to it, and, if it cannot, which purposes matter most.
That discussion takes us beyond categorising wealth and towards understanding its role in the client’s life.
A different lens on information we already have
This is where I think Map 4 can add something useful.
The financial information has already been gathered. The technical analysis will still need to be undertaken. Cash-flow modelling, tax planning, investment strategy and product selection all remain important.
Capital Purpose offers another way of looking at the same financial position.
Rather than viewing the client's wealth primarily according to where it is held, we can consider it according to what the client expects it to accomplish. Doing that can make apparently separate objectives easier to consider together and, importantly, make competing demands on the same capital more visible.
It can also create a better conversation with the client.
Instead of asking them to provide yet more information, we can take what we already know and explore it with them. Which capital is genuinely needed for their own future? What needs to remain available? What could be used during their lifetime? What might ultimately be intended for other people? Which purposes are important and which are merely assumptions that have never really been tested?
Those are not questions that should necessarily produce permanent answers.
Purpose can change. Families change, health changes, priorities change and a client's own attitude towards wealth can change. Capital that represented essential security ten years ago may eventually become capital the client feels comfortable using or giving away. Equally, money previously regarded as surplus may acquire a very clear purpose when circumstances alter.
For that reason, Capital Purpose should not become another section of the fact-find that is completed once and filed away. It is potentially much more useful as an ongoing conversation.
From fact-finding to financial planning
The fact-find gives us the evidence we need to understand the client's financial position. Capital Purpose asks us to interpret that evidence in the context of what the client is actually trying to accomplish.
The distinction matters because sophisticated financial planning involves more than efficiently arranging a collection of assets. At some point, we have to help the client decide what their accumulated capital is for, what competing claims exist upon it and which of those claims should take priority.
That is the thinking behind the Capital Purpose Matrix I am developing within Map 4.
The intention is not to create another layer of process. It is to give adviser and client a practical way of looking at the capital already revealed through the fact-find, questioning the purposes attached to it and revisiting those decisions as the client's life develops.
Because ultimately, the interesting planning question is not simply how much capital the client has accumulated.
It is what they want that capital to do.