5 ways financial advice could reduce cost of living pressures

Many of your clients may be experiencing increased financial pressure due to the current cost of living crisis.

According to FTAdviser, more people are seeking financial advice to help themselves or family members cope as the cost of essentials such as food, rent and fuel remain high.

The cost of living in the UK increased significantly between 2021 and 2022. And data published by the UK Parliament revealed that inflation hit a 41-year high of 11.1% in October 2022.

While the rate of inflation has since eased, the high price of goods and services is creating financial difficulties for many people.

Find out how a financial planner could help your clients plan for their future financial security and feel more confident about managing their money, whatever their level of wealth.

1. Support effective goal setting and financial planning

Mounting financial pressures could be taking a toll on the mental health of some of your clients.

Not having a financial plan or being unable to keep on track to achieve their goals may lead to severe stress and anxiety, regardless of an individual’s social standing or financial status.

A financial planner could help your clients review and reprioritise their financial goals if their circumstances have changed.

Creating a personalised plan that considers their unique financial situation might provide a sense of confidence and control. And, by breaking financial goals down into short-, medium- and long-term objectives, your client may feel less overwhelmed by their current financial pressures and better able to cope.

Read more: 5 ways goal-based financial planning could benefit your client

2. Help families to discuss financial situations

Money is a taboo subject in many households. However, talking openly about their situation might help families to reduce stress and find new ways to approach their financial difficulties.

Seeking professional financial advice could improve a client’s financial knowledge and give them the confidence to start discussions about money with their loved ones.

Talking about financial matters such as savings, investments and pensions might help families gain a better understanding of their situation and make their money work smarter for them. For example, this may involve using adult and Junior ISAs to save in a more tax-efficient way.

Also, family discussions are an important part of intergenerational wealth planning, which could allow your client to communicate their wishes for later-life care and minimise the eroding effects of Inheritance Tax (IHT) on their wealth when they die.

3. Consider intergenerational wealth planning

Although this may not reduce immediate financial pressures, intergenerational planning could give peace of mind to individuals who are concerned about their future and that of their loved ones. You may have clients who may want to pass on some of their wealth to help younger or older family members who are struggling due to the high cost of living.

By working with a professional financial planner, your clients could mitigate a potential IHT charge, allowing them to pass on more of their wealth to their beneficiaries. For example, they might choose to gift assets such as money or property to younger generations.

Most people can give away up to ÂŁ3,000 worth of gifts each tax year without them being added to their estate for IHT purposes. And there are a variety of other tax-efficient ways to transfer wealth to beneficiaries that may be suitable, too.

However, intergenerational wealth planning is not only about managing IHT efficiently. A financial planner could help your client adopt a holistic approach that includes planning for complex situations such as blended families, helping older family members plan for retirement and supporting younger generations to fund big investments, for example, attending university or buying their first home.

4. Explain how to make the most of tax allowances

Some of your clients may be worrying about the long term. Perhaps they aren’t currently able to save as much as they would like to or maybe they have paused their pension contributions so that they can cover everyday costs. According to Money Marketing, the rising cost of living has led a third of UK workers to consider reducing or pausing pension contributions since 2021.

Yet, there are many tax allowances that could help ease financial pressures and a financial planner could help your client explore and understand their options.

For example, the starter rate for savings allows lower earners to benefit from tax exemption on some or all the interest on their savings. If you earn more than the standard Personal Allowance (ÂŁ12,570 for 2023/24) and less than ÂŁ17,570, you could be eligible for the starter rate, which provides tax relief for up to ÂŁ5,000 of interest (2023/24).

5. Manage debt effectively

People at all levels of wealth can fall into debt.

Some of your clients may have been tempted to use borrowing to ride out the storm of higher living costs. This can quickly create a debt cycle that’s hard to escape from.

A financial planner could assess an individual’s income and expenditure, review the amount of outstanding debt and the cost of servicing it, and put a plan together to reduce or even clear the debt.

Managing debt effectively could provide valuable peace of mind and reduce the risk of long-term financial difficulties.

Get in touch

If your clients would like to learn more about how a financial planner could help them manage their finances more effectively, they should email mail@delaunaywealth.com or call us on 0345 505 3500.

Please note

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

The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.

The value of your investment 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.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.