Informed Decisions Independent Financial Planning & Money Podcast

Welcome back to another edition of the Informed Decisions Blog, Ireland's #1 Financial Planning Blog & Podcast! This week we will take on an obscure topic, a topic which is often left till the bitter end before we give it consideration! When it comes to focusing on your Financial Planning, Financial Independence or 'building wealth' it pays, quite literally, to begin with the end in mind! Speaking of Financial Planning I am delighted to share with you that the 'My Money Matters' Programme I was invited to help create with Count Her In is now alive and well (and carrying a decent introductory discount!) It was a really great thing to be involved in, to be creating a Programme which I believe will have a hugely positive impact for people that want to make positive changes in their finances. It made it all the more rewarding to get paid a few euro for my time and expertise in helping them create it! Seriously, we hope it is of real and tangible long term benefit to anyone who feels it would be of help. How Can We Die With Too Much Money!? We'd like to now introduce you to this weeks' fictitious characters, Sinead & Johnny. For simplicity we'll say they were both born in 1948, meaning as of 2018 they are 70 years old. Sinead is from the South East, but living in Dublin since she was a young lady, lured by the handsome young Johnny at the time! Sinead worked on and off over the years, while also rearing their 2 children, Sheena & Joseph, who are now in their early and late 40's. Sinead's husband Johnny worked all his life, most of it in 1 large factory, originally as a labourer and then moved into supervisor and management roles. Johnny loved working and only retired fully from paid employment at the age of 69. Since then they have both been enjoying the spoils of their 50 years of work, travelling, going away for weekends with friends & family, and enjoying the company of their 5 grand-kids! Read full blog here.......here!

We all love an oul get-rich-quick scheme don't we!? Even if we know it's far too good to be try we will 'click' through or read beyond the head-lines, we just want to know more, 'sure its only looking'.......that is what has you reading this right now! Well I am on a mission to train you out of such inquisitiveness, this is lesson 1!! (and it's totally free!) Imagine a perfectly sane and prudent nation of people getting swept up into a frenzy of buying, trading and bargaining of a particular item, an item that holds the value of a common flower bulb. Imagine the same frenzy taking hold of an entire nation for over 3 years, eventually resulting in a catastrophic downturn and wiping-out of many many of its' citizens personal wealth and life-savings. We will explore such an event which happened in the not too distant past, and explore what we can learn from it to protect ourselves from such get-rich-quick schemes in future. (some people have drawn similarities between this event and Bitcoin, we aren't doing that as they are totally different products & we have no idea how Bitcoin will progress, however the behaviour of the masses might not be that dissimilar!). Here for the full blog version. Paddy Delaney.

Oxford dictionary define a commodity as 'A useful or valuable thing'. Another definition they put out there is 'A raw material or primary agricultural product that can be bought and sold, such as copper or coffee'. Whichever way you look at it, be that a useful and valuable thing, or indeed a basic product, Commodities have found their way into many many pension and investment portfolios. Apparently as many as 4,000 years ago our Neolithic ancestors here in Ireland made use of cattle, for food, leather and indeed milk. Many of you reading this may never have milked a cow, however you may well own a very tiny portion of a fund which tracks the price of those fine animals! Chances are, if you are a member of a company pension scheme, or have some spare money invested, you are investing in Commodities, whether you know it or not! As strange as it may sound cattle prices are frequently an aspect of Commodities in investment terms, so you could well have an active interest here! We are going to look at the pros and cons and alternatives to investing in Commodities, either as a lump sum investor or a pension investor here in Ireland. Check out the full blog version at www.informeddecisions.ie

Hey, We've spoken about volatility here before, and we have put it on a bit of a pedestal on account of it's hugely positive influence on the long term saver/investor who embraces it and recognises it as the huge ally it is. Euro Cost Averaging (Or Egg-Cost-Averaging as you'll see in a moment) is an outcome of these fluctuations. Euro-Cost-Averaging is just one of the many aspects of Financial Planning in Ireland, which goes some way to explaining why our Financial Planning and Money Podcast here, is over 60 episodes old and we have so so much more to share with you dear readers and listeners. We are on a mission to become the place for people to turn when they need real information and insight which is un-biased and practical to Irish people who want to deliver positive financial futures for themselves....not too much to aim for!? What is Euro Cost Averaging? This is a jargon term the industry created many moons ago. In plain English it refers to the fact that if you are saving regularly into an investment, that investment will increase and decrease in value over time, meaning you are buying into that investment at these various points, some high, some low, which results in an average price paid. Imagine you buy €2 worth of eggs every week from old Mrs. Corrigan (fictitious character!) up the road. The number of eggs you get for your €2 from Mrs. Corrigan on a given week is based on how much demand there is for the eggs, and how productive the hens have been that week! For example one week you get 12, another week it is 8, the following week 9, another week 10, another week 9 and another week 12. Over that particular 6 weeks you got a total of 60 eggs. You paid a total of €12, so the Egg-Cost-Average here would be calculated as €12.00/60 = 20cent per egg, over that period of time! Simple! Though we like to let on we are very smart in the Financial Services industry, that is basically what Euro Cost Averaging is! Is Euro Cost Averaging An Investment Strategy or Just An Outcome!? While some argue that it is an investment strategy designed to reduce volatility and 'average-out' your returns over the long term, while others suggest that it is an outcome, whether positive or negative, when an investor contributes a certain sum at regular intervals over a period of time. We suggest it is indeed the latter. There is much research which points to the fact that as an investment strategy, it is flawed and statisticaly less likely to deliver better outcomes than investing it in one lump sum. Say you have €150,000 to invest, research suggests that it is best to invest it as one contribution instead of trying to time the markets and drip-feed it into a particular strategy over a period of time, say 12 months. You'll see why shortly. In the USA Euro Cost Averaging is known as Dollar Cost Averaging (DCA). Finance journalist Dan Kadlec of Time Magazine summarized all the relevant research research when he wrote, "The superior long-term returns of lump sum investing (instead of DCA) have been acknowledged for more than 30 years. Similarly, decades of empirical research on DCA has found that it does not function as promoted, and is a sub-optimal investment strategy". This debate is one for another day, the main purpose of the past 2 paragraphs is to outline what Euro Cost Averaging is, and is not, and how it impacts. So What Does Euro Cost Averaging Actually Do? What better way to explain it than to display it in numbers. Let's imagine this weeks' character, we'll call her Grainne, starts a regular savings investment or indeed a pension where she will be contributing the same amount every month, even for 6 months: Month 1 - Cash Invested: €300 Unit Price: €1.00 Units Bought: 300 Month 2 - Cash Invested €300 Unit Price: €1.10 Units Bought: 272 Month 3 - Cash Invested €300 Unit Price €1.50 Units Bought: 200 Month 4 - Cash Invested €300 Unit Price €1.20 Units Bought: 250 Month 5 - Cash Invested €300 Unit Price €1.15 Units Bought: 260 Month 6 - Cash Invested €300 Unit Price €1.00 Units Bought: 300 So, as you'll see from above, there was quite a lot of volatility in the first 6 months of Grainne's investment journey, that's purely for illustration purposes! The value of the fund she was investing in grew by 50% in value and came back down to the price at which she had started investing 6 months ago. How does that leave her in terms of being up, down or level!? Grainne has at this stage invested €1,800 (6*300). She has a total of 1,582 units in this particular investment, meaning she has paid an average of €1.14 per unit. Considering that her units are currently all actually worth €1.00 she will actually be down money, as she paid a high price for units relative to their current value, particularly in months 3 and 4! She would have invested €1,800, as we saw, and as at month 6 her fund would be worth €1,582 (1582 units * current price of €1.00!). Grainne may well feel like this has been a rubbish investment, and want to cash out her chips now, but alas we must not allow her take such a knee-jerk reaction....... So, whats the moral of this particular story I hear you ask!? Well as you can see, if you are buying units (investing) on a regular basis, even with Euro Cost Averaging, you would be best advised to keep a hold of your investment until the value comes above the average price at which you have paid over the course of the investment journey. If you are in a pension, the timelines will obviously be much much longer, however the same principles apply. Another moral of the story is that, if you are investing regularly, it may seem counter-intuitive really you do not want to see the value of the fund going up! At least until it is time for you to cash in your chips! You really do want to be buying them at a low price, accumulating them at a huge volume, and when they come up in value, you cash them and then enjoy the fruits of your labour! Buy low and sell high is a term we have all heard of, Euro Cost Averaging can help you achieve that......let's see how.. Does It Help Me As a Saver? In this story we're going to outline Joe's investment journey. He is a good guy, has a great financial coach who has identified his goals, and indeed his concerns regards his retirement planning. Joe needs to accumulate a pot of €200,000 by the time he is 62 in order to allow him reduce his hours, and to support the lifestyle that he desires, in addition to his other assets he has. So off Joe goes and start contributing €600 per month into his pension.... Month 1 - Cash Invested: €600 Unit Price: €0.20 Units Bought: 3000 Month 2 - Cash Invested €600 Unit Price: €0.18 Units Bought: 3333 Month 3 - Cash Invested €600 Unit Price €0.15 Units Bought: 4000 Month 4 - Cash Invested €600 Unit Price €0.12 Units Bought: 5000 Month 5 - Cash Invested €600 Unit Price €0.14 Units Bought: 4285 Month 6 - Cash Invested €600 Unit Price €0.20 Units Bought: 3000 Joe's initial 6 months were too a roller-coaster, with his fund falling in value by 40%, from 20c to 12c at one point. In real terms this would most likely feel like armageddon again, there would be some sort of economic crisis to drive a well diversified portfolio down by 40%, but it will happen again soon, mark my words! So, despite this sense of panic around the place, thanks to the strong financial coach that is working with Joe he persists and has faith in the constant upward curve that is global equities, and he actually end up big-time in the green. Joe has invested €3,600 at this stage, he has a total of 22,618 units. Divide one by the other and we can see that the average price Joe has paid for his units has been just under 16cent. They are currently worth 20cent, so his €3,600 is now worth €4,523! And that was having gone through a financial crisis that had eroded 40% of the value of his fund at one point! Moral of the story for Joe? If you are regularly investing through a crisis that smashes the value of your investment fund, you are buying cheap, you are accumulating huge numbers of units at a discount......it's like a Next Sale in Blanchardstown Shopping Centre.....except at this sale every eejit in the country is quite wrongly telling you to keep your money in your pocket/deposit account....more fool you if you listen to them!! How Would It Have Gone If They Invested a Lump Sum? The funny thing is that if Grainne had of invested a lump sum in month 1 instead of regular payments over the 6 months, she would be in the same position she started, having paid €1 per unit at the start, the same point it was at by the 6 month point. So for her, you could argue that she'd have been better off doing a lump sum, but you can only say that based on the value it is right now....... If Joe had invested a lump sum, he would be breaking even at this point also. He is better off having paid regularly. The moral of that story?! Nobody can tell what the markets will do, it is not a debate to get into, should I aim to Euro-Cost-Average or will I go with the Lump Sum, impossible to answer, it's a bit like the old chestnut of a question, 'Should I Fix my mortgage or go with a variable rate'!? Impossible to predict future rates/fluctuations. What some would argue however, is that based on the fact that equity markets are positive more than 70% of the time, if you dollar-cost-average your way instead of going with a lump sum at a particular point in time (if you have the lump sum available) you will more than likely be paying higher prices by purchasing at more points in time. This debate of Lump Sum or Euro Cost Averaging is for another day, so this might just whet the appetite! Thanks, Paddy Delaney QFA | RPA | APA | Qualified Coach

We kick of 2018 full of optimism, gratitude and excitement for the year ahead. After what was hopefully a nice Christmas break we all are raring to go, and apparently as many as 50% of us (myself included!) feel that customary urge to set some resolutions for the year ahead. The top resolutions that we make (the 50% that do!) are; weight loss, exercise related, smoking/alcohol related and money related. So even as a broad estimate this suggests that 15% of the population in Ireland try to motivate themselves into better money management habits at the beginning of the year. According to Professor John C. Norcross Ph.D of University of Scranton Psychology USA, 10% of all resolutions result in sustainable change. Pretty poor that therefore 90% of all resolutions crash and burn! We are keen students and readers of all things performance, behaviour and success related here. Never-mind it's impact on how we deal with our money, the ability to perform, behave or succeed has such huge impact on our life and the lives of those around us. For this reason we decided to kick-off 2018 with something a little different (this will be a common theme to 2018!). What Do Resolutions Look Like? Resolutions are often very broad and sweeping statements. I will give us smoking. I will spend less money. I will clear my credit card. I will eat less Ben & Jerry Ice-Cream! They all sound worthy, they are probably all very well-intentioned, however they are all vague. There is no time line, no specific action, no measure as to whether it was a success, or way of measuring progress. As a serial resolution-maker of maybe 10 years now I, for one, can confirm that they just don't work! Not only that but by the end of January I've probably passed the self-deprecating phase of under-performance and am firmly into the 'I actually didn't want to change' phase by March. By April it's 'I can't remember what my resolutions were' phase!! A resolution is defined as a 'firm decision to do or not do something'. Essentially the above resolutions, or decisions to do or not do something are based on habits, smoking habits, eating habits, exercise habits, money habits. Habits as we all know can be very difficult to change, hence they are habits! Why Do Resolutions Fail?? We've done quite a lot of reading on this, seems there are a few trains of thought we will share here now, that might prove useful if you are one of the 'resolutioners' who struggle with making progress on your resolutions! Take what you will from these, some may seem more credible than others, perhaps see which one sits best for you! 1) False-Hope-Syndrome: When we make resolutions we often aim too high relative to what we truly believe we can achieve! For example, If I'm eating 15 portions of junk-food/snack per week and I set a resolution for myself of cutting all junk-food from my diet, my internal dialogue/subconscious is already telling me (quietly!) that 'there's no way in hell you're going to be able to do this'!! We have all heard of false-hope, so essentially what this train of thought suggests is that some of the resolutions we set for ourselves are walking ourselves into it, and a confidence-bashing if/when we fail to reach the targets we set ourselves! 2) Cause & Effect: This idea stems from the suggestion that when we set a resolution, and we actually do the new habit for a period, that if we don't notice the desired effect immediately we can become de-motivated and fall back into old habits! So, lets say I decide I want to be 'better with my money'. If I watch my spending, open a savings account and start popping money in for a few weeks, and maybe even start contributing to that pension that I had been putting off. Well unless I get the desired feeling and feedback from having done that i am in high risk of cancelling the whole friggin' lot and going back to my old ways! We love feedback, we love knowing that what we are doing is having a positive impact and that we will be much better off as a result. If we don't get that feedback quickly we might fall off the wagon! 3) Self-Stories: This suggests that we ALL have internal self-stories, views on how we see ourselves living and behaving. This internal and mostly subconscious viewpoint determines much of our behaviours, habits and importantly our decisions. Your subconscious has predetermined, based on your self-stories and self-talk, what decision you will make when you are confronted by the choice between a salad or chips and burger for lunch on the 18th January!! It does also suggest however that we have the power to change our internal self-stories now. We can, through visualisation and goal-setting change how we see ourselves living and behaving. This is said to be one of the single most powerful tools in performing as we want to perform, to achieving what we want to achieve and in ultimately changing habits. Say for example that you wanted to clear the debt you owe on a credit card. Up to now you had been slow to clear it, instead you have in the past made unnecessary purchases, clothes, cars and other items instead of actually clearing your debt. If you have been this way for years then your self-story will likely re-affirm for you that you are 'bad at clearing debt' and that you 'love to buy nice things instead'. That is your self-story, for you right now it seems true. However you can change that story....we can convince ourselves of a new self-story, one whereby we will see ourselves as 'great at paying off debts quickly' and 'able to resist impulse purchases easily'. When we are next faced with a decision about what to do with the €300 left in your bank account on the last day of the month, you are much more likely to act in a way that is congruent with your new self-story.....you'll most likely happily direct that money to your credit card as opposed to spending it in Arnotts! What Could We Do Instead of Setting Resolutions? If you have been setting them then the research suggests that you are very likely to have failed. That doesn't obviously mean you should quit resolutions (ironic!). However there is a lot of research out there that suggests we should not frame desired behaviour change as 'resolutions' for ourselves. Instead there are, for example, some really powerful goal-setting tools that we could use to help us get to where we want to get to. Instead of having a broad resolution such as 'I will get better with my spending habits', try and build a goal using the following framework, SMART. Specific: Try and be as specific as possible about the behaviour/habit you want to create. Don't aim to do lots of things, focus on the really important thing for you. Pick one not 5! Measurable: If it is not measurable in some way then it will be impossible to know if you are making progress (feedback) Attractive: It must appeal to you, deep-down be of meaning to you. If not it will fall by the way-side when life gets in the way! Realistic: It much be realistic, by all means make it stretching but not crazy stuff! (false-hope) Timely: If you are aiming to be doing the new habit, by what date exactly do you want to be doing it, and for how many days/weeks in a row. Ideally aim to do whatever it is your doing within the next 3-5 months max, any longer and it is too easy to put if off until 'another time'! Using the above tool (which has been around for centuries by the way, not my creation!) may just help turn a vague and broad resolution into a really appealing, measurable and sustainable goal to be achieved by a certain date in the near future. What Else Might Help? The research shows, and personally I believe it, that if your goal is written down then you are much much more likely to achieve it, whether it is a goal, a habit, a behaviour, the action of writing it down, and ideally being able to see it regularly will keep it at the fore-front of your mind, might help re-write your self-story, and enable you to do whatever it is you have set for yourself. It's probably worth noting too that they suggest it takes 21 days to form a new habit. It's kinda hard to understand how they have measured this! Irrespective of how long it actually takes it's probably fair to say that when we set off on our quest to reach our goal we should be patient with ourselves, good things don't generally happen over-night....so expect it to take some time! If we can be of any support to you over the year then by all means feel free to use us! If we can act as an accountability partner, or someone to check in with on soem queries then please do so...if we can help we will help. Looking forward massively to a hugely fun and full 2018! Paddy Delaney QFA | RPA | APA | Qualified Coach

What do most of us have......really really desperately wanted it initially..........but now we really really want to get rid of (a clue, it's not your partner!).................the answer is of course our mortgage! We have covered mortgages a few times on here, including the ever popular 'should I clear my mortgage or save for the future' episode. This week we are going to ramp up the pressure on existing mortgage holders, we are going to hold a mirror up to them and their habit, and indeed inertia! In a survey we held earlier this year we asked how many of you believed you were on the best possibly mortgage rate.....interestingly 70% of people were not sure! That points to the fact that people aren't informed as to the best mortgage rates in Ireland at the moment, and whether they are getting the best deal available or not.....we are going to fix that right now! Switching mortgage in Ireland for some reason is no that popular versus many other states, however for some it can be a very financial prudent thing to do! Firstly, thanks for checking out Ireland's #1 Financial Planning Blog & Podcast, we are delighted to have you visit! By all means please do check out our 'why' which will explain why we are creating this blog and podcast every week for our listeners and readers! Also, thanks a mill' to our latest iTunes Reviewer, it means a lot to us, so please do pop over and leave a review if you have a minute!? Can I Switch My Mortgage? There's no point in getting all excited about the benefits of switching mortgage (there can be many!), if it is not available to you....here's what you'll need to prove: You have an existing mortgage! You live there (usually only benefits 'owner-occupiers) You have a clean payment history on that mortgage in recent years You have consistent/permanent income(s) which the bank will deem sufficient to repay the 'switched' mortgage You have the time required to compile documentation & attend solicitor and bank/broker in order to switch to the new loan You will want to be benefiting financially in order to even consider switching, so you'll need to know what the savings (if any) will be Be prepared for some element of hassle, as these things usually always have some twists and turns! You will need to be of an age where the bank is willing to give you the new mortgage up to a reasonable age, some banks will lend to you till you are 65, others to 70. Should I Switch My Mortgage? Another humdinger of a question! We can't answer that question for you, but we can show you how to answer it for yourself. There are lots of comparison websites in this country, and there is no doubt that they help people get better deals. They make their money from people switching. There is also a government funded switching site that is pretty awesome, which we are big fans of here, and that is the Competition & Consumer Protection Commission website (I think they could do with some help on the name of the site in fairness!). It's a fabulous and totally un-biased site which is updated daily.....check it out here. All you need to have to hand in order to do a comparison is the following: How many years left on your mortgage Approx value of your house How much you owe currently on the morgage How much you are paying each month Be careful with number 4. Make sure that the figure you put into the calculator is the amount you are paying toward the mortgage each month. So of us have home insurance or mortgage protection included in the same direct debit. Make a phone call to your lender if needed in order to determine exactly how much the mortgage repayment is on it's own. Whack the figures into the calculator and select whether you want to compare it to best Variable rates, or Fixed rates of the various terms 1 year to 10 year. What is APRC? In the next section you will see APRC referred to when detailing two different rates of interest on a mortgage. This stands for Annual Percentage Rate of Charge (as if we needed another acronym!). It is however the only accurate way to compare two rates as it includes all charges in the rate, including set up charges. It is common to see an interest rate quoted of say 3%, however the APRC is almost a full 1% (3.9%)......moral of the story is that you go with the APRC in comparing loan rates......now that we have that cleared up lets get on with the story for you.... How Much Could I Save By Switching Mortgage? A real-life story! We want to share a real-life story with you. A friend of the show, we'll call him Jimmy, got in touch to tell us that on the back of a recent blog/podcast we did he went on the hunt to reduce his mortgage payment. He shared his story with us, and invited us to share it with other listeners so that they could too benefit from it. Jimmy lived in his house with his wee family. The house was valued at around €290k. He had a mortgage of €170k, and was paying €915 per month. The rate was 3.9%. There were 25 years left on the mortgage. Jimmy and his partner are in their 30's. They shopped around for the best rate mortgage they could find. They managed to find a market leading fixed rate of 3.05%, for a 10 year fixed mortgage. They were keen to fix it for the medium to long term as they wanted that security knowing it would not increase in future, that was important to them. This rate was subject to them switching their current account, which they were happy to do. In addition they were going to get 3% Cash-Back provided the loan was drawn-down before March 2018. They were both working and earning the same salaries as when they originally took out the mortgage, with a clean payment history. They got the ball rolling on the new loan via a broker, informed the original lender of their plans, and then followed the process with the new lender. Essentially the new loan goes directly across to clear the old loan, one cancelling out and replacing the other. They are now paying €90 per month less than they were on the old rate, with the term the same as the original mortgage (they had the option of reducing the term but they wanted to keep it as long as possible for now). They also got €5,000 Cash-Back recently which has helped them hugely! All complete in a little under 3 months! yes they had to pay a solicitor €1,200 for the legal side of things, and there was some time invested in meetings and gathering info, however..... Over the term of the mortgage this switch, including the Cash-Back, stands to benefit them €32,000! Delighted for them! What About The Insurances? When switching do try and keep your existing Mortgage Life Cover, provided it is the most appropriate cover for you (worth taking this opportunity to make sure it is actually!). Your original lender would need to 'release interest' in the policy before the new lender can note it on the new loan ('assign it'). It is always prudent to make sure it is 'assigned' to the new loan so that in the event of a death the benefit goes directly to the lender to clear the loan. Also really important obviously to make sure there are no 'gaps' in cover if you are cancelling or replacing either the Mortgage Life Cover or the Home Insurance.....if something tragic were to happen during that 'gap' you could be left in dire straits! Are There Another Other Options? Your existing lender might well be able to do you a better deal than you currently have! You may not need to switch lender in order to get a better mortgage deal, saving you the time, hassle and expense which comes from moving to the new lender (documentation, solicitor fees etc). So if you have decided to switch it is always worthwhile contacting your current lender and telling them your gone unless they can do something similar for you! So there you have it.......the 'can I', 'should I', 'how do I', 'what will I save' of the mortgage switch conversation.....do be a legend and share this with your peers and anyone who you reckong would benefit from knowing about this. Thanks for reading, you're a legend! Paddy Delaney QFA | RPA | APA | Qualified Coach

Welcome to another episode of Ireland's #1 Financial Planning Blog & Podcast. This week we have a cracking interview with UK's Jason Butler, where we discover some tips and guidance on achieving financial well-being, getting our lives the way we want them to be. Jason has super insight on this aspect of life, and is now living his message.......most of us will hopefully take a few nuggets from this interview (I'm not taking any credit there!). Be sure to check out our wee website, our why, and if you like the show then an iTunes review would be a much appreciated gesture to us.......You're a legend! Enjoy, Paddy Delaney QFA | RPA | APA | Qualified Coach

This week we are aiming to share some slightly different insights, and reveal some major news in the world of Financial Services in Ireland! Last week the Central Bank released a proposal which is due to come into force next year (subject to Dept. of Finance), which is aimed at maximising the protection consumers get when it comes to buying any financial products....we have dissected all the Publications released by Central Bank to determine the details, and it's an interesting one! Firstly, thanks for checking out Ireland's award-winning Financial Planning Blog & Podcast, we're delighted to have you join us. We'd be thrilled if you had the time to check out our 'why', and to learn a little about what we are trying to do, for you our reader. The Green-Grocer! Indulge us for a few moments, trust me it'll make sense shortly! Imagine that you are walking down the road after getting off your bus from work, and you notice a shiny new green-grocer shop on the corner. It's called 'Gerry's Independent Stores'...sounds good to you! You walk in and the friendly green-grocer welcomes you with a big smile, a warm welcome, and inquires as to how he can help you.....you are taken aback at his hospitality and part of you reckons 'I'm gonna be sold something here'....therefore you reply in the usual way and state that you are 'just in for a look'! The shelves are stacked high with produce, so much choice of all your staple items, different versions of everything......you are confused with the level of options and so ask for some help with regards picking the 8 items you actually do need, milk, bread, broccoli, ham, cheese, yoghurt, apples & grapes (you healthy divil you!). Before you know it the kind shop keeper picks out a version of each of the 8 items, in addition he tells you that he has a special rate going on the eggs, asparagus, Mars Bars, and Ice-Cream and he encourages you to buy those as well. You reckon that you actually probably could use these other items so you agree to buy them. You go to the counter, pay for your stuff and happily head on off home with your shopping for the next few days done, and away home to make the dinner! How Did The Green Grocer get Paid? It is only the next day that you hear from a mate that the Green-Grocer actually makes more profit on certain options than on others. He picked the options for you that result in him getting the most profit. He also invited you to buy more stuff, because it turns out he gets a large bonus from the provider of the eggs, asparagus, Mars Bars and Ice-Cream if he sells a certain amount of it. In fact, he actually also get a holiday every year if he sells certain amounts of it to his customers. He might also actually get support to pay for advertising and marketing if he agrees to only sell that particular producers product....how do you feel now? Some people might feel like that is what they expect, others might not care less, while others might feel that they were being encouraged to take and buy stuff that might not have been the things that they needed or wanted! Again, how would you feel? How Are Financial Advisors Paid? It will be no surprise to majority of you to hear that most Financial Advisors & Intermediaries, Banks, Brokers are paid in a similar way. Majority of Brokers, Banks & Advisors (also known as Intermediaries- i.e the seller of products on behalf of a product producer) get paid commission when they sell a certain product. It is also known that some get paid more for selling a certain product, and indeed get paid bonuses if they sell a certain amount of certain products from certain providers....all very certain!! It appears to us that the Central Bank are on a mission to increase the transparency that you the consumer has in regards how your 'Green-Grocer' is paid by the providers. In fairness that makes total sense. As we keep banging-on-about here, the focus of the industry has for too long been lazered onto selling products as opposed to delivering the real outcomes that consumers need and want....more often than not a product is required, but it should not be the starting point of the conversation! What Will Change For You, The Customer? In essence what the Central Bank appear to be aiming towards is a situation where there is a full and clear menu available to the customer as soon as they look up the 'Green-Grocer' online....you the customer will be able to see exactly what the grocer is paid from each provider, in advance of you actually going into the shop. The impact of this would be that the next time you go into 'Gerry's Independent Stores' you will know how much Gerry will make if he sells Brocolli A, Brocolli B, or Brocolli C.....again all about improving the transparency for the shopper. Also, when it comes to mortgages, the Green-Grocer is currently paid a % of the loan that the customer takes out (Green-Grocer being bank/broker/any intermediary), so the more you borrow the more commission the grocer gets.....well they are looking to put an end to that it seems, by introducing a cap on commission which the grocer gets, irrespective of the amount being borrowed....again our take is that The Central Bank are aiming to reduce the chance of a consumer being 'given' more of a loan than they need, which would mean that the grocer gets a bigger commission. Them days appear to be at an end. Is Gerry Independent?? As you have heard, Gerry's store is called 'Gerry's Independent Stores'......however if you are looking at how he is getting paid and the bonuses he can make by selling more product from a certain provider etc, then you could argue that he is not independent! If the Central Bank's recommendations come into force in full next year Gerry will have to remove 'independent' from his store name! The Central Bank appear to be very keen to ensure that only a grocer who is receiving no form of commission from a provider can class themselves as independent. Meaning if you go to an independent store once these recommendations come into force that you will have to pay out of your own pocket for the advice and recommendations. If they do state that they are not chargin you commission but that they are charging you a fee, which is being paid to them out of your products, via the provider, this will be classed as not being independent from the provider, and hence not independent in nature. How Can I Get Independent Financial Advice in Ireland? In simpler terms only a grocer who does not take commission of any sort, whose only income is the income he or she gets from charging a fee directly to the customer, will be able to call themselves independent under the new Central Bank recommendations. That is quite different to what is and isn't classed as independent in today's world of financial advice! If you think about it it makes lots of sense to only allow an advisor who is totally, financially and otherwise, independent of the product provider to be able to call themselves independent...... How Will This Impact On Us Getting Financial Advice? Some are saying that it might reduce the number of financial advisors in the country. Others are saying that financial advisors who typically have lots of providers to choose from will reduce the number of providers to just 1, so as to remove the need to choose between different ones based on something other than the commission. Others say that it will open consumers eyes to the level of commissions that are being paid, and will disillusion them about financial advice altogether. The last point, from our perspective would be a huge shame. The benefit of true financial advice and financial planning is usually way way beyond the cost associated with it. The avoidance of huge mistakes, the putting in place of plans which support your long term goals and lifestyle aims is worth so much more than the cost, again usually! We, for what it is worth, hope that the impact will be the rise of much more customer focused approaches from more and more of the industry. If that happens, and much like the investment markets nobody knows, then the recommendations will have been a rampant success. We're hoping. Thanks for reading. Paddy Delaney QFA | RPA | APA | Qualified Coach

Welcome to Ireland's #1 Financial Planning Blog & Podcast. Our purpose is to help you make informed decisions with your money, and importantly to avoid some costly mistakes that they rest of us have made! We are aiming to make this THE home of Financial Planning ideas and insight for normal people in Ireland! This week, after last weeks' cracker about clearing your loans at 32, we are back with a bang, and what more do we love than a good oul list! Which is ironic seeing as only recently I had the fortune to have attended a Workshop on using Mind-Maps....which suggest that lists are the devil's work and that our brains hate lists really. I have to say I am a fan of Mind-Maps now, I'm converted, so don't be surprised if I land a financial one on you all in the very near future! It was actually doing a Mind-Map for myself that got me thinking about what is absolutely of most importance to me at the moment in terms of personal, family, career etc. It got me thinking of what we might say to an 18 year old version of ourselves, had we the chance to go back and give ourselves a right good talking to!! So here's my take on the 5 Simple Things I would encourage myself to have done financially from that age: Be A Life-Time Learner: Personally I'm a little late to this party, only really getting into 'informational sponge' mode in the past 5 years. Had we forced ourselves as 18 year old's to read, and be curious about all things financial it probably fair to say we would be in a much better position financially than we are currently. So if you have found that you are still a little financially illiterate (you couldn't be if you are reading this right!!) then may I suggest starting with this book, a true gem; Millionaire Teacher. Harness The Power Of Compounding: We have flogged this one to bits here at Informed Decisions but there is absolutely no escaping what Einstein referred to as the 8th wonder of the world. Imagine starting off at 18 years of age saving €250 per month. If you achieved a growth of 6% per annum, by the time you are 48 years of age this is worth €250,000, you yourself contributed a mere €90,000, the rest, €140,000 was magiced-up via compound interest....what possibly are you waiting for dear friend! Become An Owner As Early As Possible: We believe that owning is much much more advantageous than borrowing. Take a home, for most us we need to be a borrower before we can be an owner.....the earlier you borrow the earlier you own (clear the friggin mortgage!). Despite the ups and downs of property value it is quite often clear to see that the sooner you can get onto that ladder, barring disaster, you may well stand to benefit earlier. The very same can be said of owning investment assets, be they property, equities, or other, it is much better from a long term returns perspective, to own as opposed to borrow, which you essentially are doing by owning Deposits Accounts! Spend What You Have Left After Saving: Another that we beat the drum about here. Nobody enjoys the process of actually delaying gratification (usually!). Why would I save this money when I can out on the town tonight with my pals and have a whale of a time!?! By removing this choice from our hands we are ensuring that while still enjoying enough nights-out, that we also squirrel some money aside to realise our goals in the future, whatever they may be. It is so easy now to set up standing orders and savings accounts online that there is really no excuse not to, right now, go and set up a standing order out of your current account and into a savings account, the day after pay-day! Again, what oh what are you waiting for dear friend!? Most of the time people find that they can adapt to the new spending amount, so it's a win-win! And while you are at it I'd also make sure to know exactly what is coming in and what is going out each month....and to turn up or down the savings element whenever the situation warranted it...the art of budgeting! Keep An Eye On The Small Print: So many people are swamped with jargon and terms and conditions when they do anything remotely financial related. Unfortunately it is usually one EU regulation or another that is insisting that you get this stuff. However the providers of these materials don't always make it easy for you to understand and digest them. One of the biggest culprits here is the fees and charges that you may be paying on financial products, savings, pensions, investments. These fees vary so so wildly from provider to provider that the difference between one and another can be a staggering amount of money.......make sure that that difference is in your pocket. Always always, as painful as it might be make every effort to know exactly what the fees are before you enter into anything......if you can't bring yourself to do it then ask someone for help! So there you have it.....our 5 Simple Things....Simple but not necessarily easy....but hey nothing worthwhile is easy right!? However with a bit of knowledge and some good old fashioned effort we believe they are realistic, timely and above all hugely impactful for anyone to apply. You might want to send this or share it with someone who could do with the nudge! Oh, and we are going to be introducing an element of 'readers & listeners questions' on the show every few weeks, so if you have any question you would like answered on the show just pop me an email here and I will do my utmost to include it in the next weeks' show and to answer it coherently!! Thanks a mill for reading....... Paddy Delaney QFA | RPA | APA | Qualified Coach

Welcome to Ireland's #1 Finance Blog & Podcast. We are here to help you make informed decisions with your money...and ultimately to bring true Financial Planning to Ireland's normal people! This week we are taking a little peep into the magical world of Jimmy & Aggie.....how they have different views on life and money, and ultimately how they went their separate ways with regards their pension options, and how that panned out for each of them! Aggie's Story: Aggie is in her mid-30's, a sound woman by all accounts! She works as an Accountant in a medium sized law firm. She's as happy as a trout in her job, and plans on working her way up the ladder over the next 10 years in the firm. Good on Aggie! When she met her now husband Jimmy it was like a scene from a Disney Movie.....sparks were flying.....they were married within 6 months. That was 7 years ago now, and in fairness their gut feeling was right...they're having a ball! Herself and her husband Jimmy have a wee baby girl, Jacinta, who is the centre of their universe at the minute! Even before Jacinta's arrival Jimmy had been at Aggie to start stashing some of her disposable income instead of spending it on more 'bloody cycling gear' (they are big cycle fans ya know!). Being the loving and responsible sort she has given in to Jimmy's insistence and recently went to get some advice on getting herself a pension. Aside from Jimmy giving her the verbals about doing it she has read and noticed lots of articles and blogs about it over the last few years, generally scare-mongering her into doing one with headlines such as 'start a pension of die a penniless and miserable oul widow'...none of which really gave her the nudge to do one! She met with an advisor, a highly qualified professional, also in her 30's. This advisor recommended that she should put in place the 'life-styling' option, which she was told will gradually move her funds from the 'volatile shares portion' of her pension pot to the 'more stable bonds & cash funds' as she gets nearer to retirement. She is told that by the time she is 65 or so that 75% of the pot will be in 'steady and secure' cash while the other half will be in 'volatile shares'. Ultimately the intention would be to protect the hard earned savings that Aggie would have built up by that stage. This sounds like a great idea to Aggie, she has heard one or two stories over the years of people 'losing' their pension pot as they get near retiring because of a crash or recession & she ain't a fan of that happening to her thanks very much! Seeing this as sound advice Aggie duly accepts the recommendation and signs-up, starting off with a monthly payment of €300 to her PRSA. Based on the information that her advisor gave her when she gets to age 68 this should build up to about €200,000 after charges and accounting for the Lifestyling. As a result of reducing the % of your pot invested in funds which offer solid growth, it reduces your potential growth over time. Fast forward 3o-odd years, Aggie and Jimmy are still blissfully married, their now 3 kids have grown up and left the nest educated and set up to go and do their thing! They are both eagerly anticipating their retirement and going to do all the things that they have been putting off for 30 years (you can see where this is going!!). Aggie has long dreamed of herself and Jimmy taking 6 months to cycle across America......a friend of hers did it a decade ago and she has been planning for it since. She reckons that trip alone is going to cost them in the region of €30,000, a fair chunk of her anticipated €50,000 tax free lump sum from her PRSA when she retires. As luck would have it just as Aggie is turning 68 and about to cash in her pension pot the markets have a shocker.....a global financial crisis of 2007 proportions strikes....global equities fell in value by 50%. Luckily for Aggie only 10% of her total pension pot (€200,000) was sitting in an equity fund. It could have been an awful lot worse but because the bulk of her fund was in cash her fund value has only fallen by €10,000, from €200k to €190k, as she goes to retire. At this point in time she is showering grateful blessings on the advisor she met all those years ago for recommending Life-styling. Had she not had Life-Styling she would have potentially still been fully invested in Equities, and therefore lost half of her total pot. Aggie then takes her 25% tax free lump sum, squirrels the rest into an Approved Retirement Fund (Check this out if that means nothing to you!). With her €47k tax free lump sum she decides then to treat herself and Jimmy to a 1st class trip via Concorde (its 2058 now, Concorde has been reintroduced right!!) to the west coast of USA to begin their cycling adventures.....the rest is history! On her return from the trip she decides to leave the fund 100% in 'safe' funds which offer no potential for growth but at the same time won't fall in value..... So Life-Styling did a great job for Aggie here, it saved her large cash-pile of €200k falling in value by a full half just as she was going to retire. So What Were The Benefits & Not-So-Benefits Of Life-Styling On Her Pension? It protected her fund from falling sharply in value as she was retiring (cashing it in) It gave her peace of mind knowing that the funds were being 'de-risked' as time went by It reduced the potential for growth in her pension pot as time went by If she stays in these low volatility funds she will likely be losing money versus inflation over the course of her retired years. She will be paying fees to be in funds which are unlikely to earn any real return for her So Let's Now Hear Jimmy's Story! Jimmy was always smart with his money, he was reared with a prudent approach to looking after his money and was a diligent saver from early on in his career. When he set up his pension in his early 20's Jimmy decided to let the constant upward curve of the great companies of the world do their positive thing to his pension pot over the long term, and hence he decided to forego the Life-Styling option on his pension pot. He wanted to leave his funds exposed to the full power of a global equity fund over the long term. He was aware of the fact that volatility is your friend over the long term and so did not want to move the bulk of his money into cash funds as he got older. Jimmy has been saving €300 into his PRSA since aged 25. Assuming the same annual growth rate as above, however this time without the impact of Life-Styling removing the potential benefit of growth, he will achieve a fund of €540k at age 68. (the power of starting early!!). Like Aggie Jimmy is mad into the cycling. Loves it, however he doesn't buy all the gear, he rides a 10 year old bike, wears the same 3 bib tights and top for the past 5 years, and services his bike once a year himself.....the ultimate prudent cyclist...he prefers to enjoy his holidays, experiences, and saves the rest...hence his saucy pension pot going on! As with Aggie lets fast forward 30 years. Jimmy's pot is worth a smoking hot €540k and he is licking his lips at the thought of the big 25% tax free lump sum of €135k.....and again because he is so prudent he is letting Aggie pay for the big US cycling trip...this money is to last him for another 30 years hopefully! But of course, as you already are aware he suffers the same crash as Aggie (it's the same time of course!). Aggie's fund was well protected from the crash and the 50% equity fund falls however his wasn't, he was 100% in global equity fund, so you guessed it his fund falls from €540k to €270k, yikes! Just as well Aggie is taking care of the US trip. So what does Jimmy do now? Well he has options....he can leave the funds there and let them recover. And here is the kicker ladies and gentlemen............the average period of time it takes the market to go from 'very bottom' (trough) to 'very top' (peak) over the last 23 bull/bear market cycles has been 1096 days, less than 3 years (based on our own calculations from Standard & Poors Corporation data). This suggests that if Jimmy leaves the fund alone and lets Aggie look after things for a few years his €540k will be restored in full....and he can then go about taking his tax free lump sum and invest in his ARF/AMRF, and yes still continue to invest in the constant upward curve of the great companies of the world...happy days! Yes for sure it would have been a challenging time and one in which he would have had to resist the temptation to move his pot out of the rapidly declining equity funds and into the 'secure' cash fund, but that would have been the singly most financially costly mistake he would have made over his entire life, fact. Well done Jimmy for not doing that, for trusting the upward curve and for remaining optimistic. The Benefits & Not-So-Benefits Of Not Having Life-Styling On His Pension? It allowed his fund remain fully invested in the great companies of the world, accessing the growth they achieve over long term (good) Allowing him move from working to retirement and the bulk of the funds remain in the same funds (good) If the markets took longer to recover then he might need to access the funds, ultimately selling them at a low price (not good!) He is exposed to the volatility, and the concern that that can cause an investor (not good if you can't handle it!) He is avoiding having to pay high fees for investing in cash funds (which will cost him lots!) So what's the moral of the story? Should I use Life-Styling on my pension funds? Should I remain invested in what are deemed to be high risk funds in my pension? Is Life-Styling a genuinely useful element on my pension and as part of my overall Financial Planning here in Ireland? It really depends on your outlook, and on your capacity to ride the crash(es) when it/they hit. If you can do that then perhaps Life-Styling serves little of no purpose for you. In fact Life-Styling, while reducing your volatility as you approach retirement will potentially rob you of much of the gains to be had by investing in the first place....not forgetting that you will be paying in the region of 1-to-2% in fees each year just to be in the PRSA...so if you aren't achieving at least that then you will be losing money anyway- never mind also beating inflation over the long term! To do all that you could be needing to earn in the region of 4% growth per year to thread water! As always we believe those who work with a competent and effective financial advisor/coach can do it most effectively, can resist the urge to make knee-jerk decisions based on temporary declines in equity values....in the history of the market all declines have been temporary, and that's another fact! So if you plan to embark on an adventure of a life-time like Aggie & Jimmy did then make sure you know what number your current pension is likely to give you, and if Life-Styling is something which you believe will aid you or hinder you in getting to enjoy that adventure. Thanks so much for reading. Paddy Delaney QFA | RPA | APA | Qualified Coach P.S: Thanks so much to Devined5 for our latest iTunes Review.......he/she called it a 'super informative investment podcast'.............thanks so much Devined5. If you would like to support us then an iTunes Review is a great way to do so....just follow this link