As customers enter, show them the exit

22 March 2010

By definition, financial planning is about making assumptions that match aspirations to changing circumstances.

Nobody has a crystal ball and if history teaches us anything it is that predictions are often wide of the mark.

That’s when advice concerning the cost of exiting a deal comes to the fore. A good example of this is redemption penalties on mortgages, including lifetime deals.

Clients are now more aware of the interest rates they are being charged and asking for help with choosing products at a more competitive price.

So it is conceivable that a client aged 60 could change providers three or four times and consequently find that redemption penalties apply.

Also, although older people often feel their life has reached a period of stability change continues to happen to them. This can result in the need for a change of plan - for example, a requirement to downsize.

Explaining the implications of early redemption of a deal is vital to the planning and advice process at the beginning of any sale.

Failure to do this could at least cause embarrassment when having to explain the situation to a client or at worst lead to a justified complaint to the ombudsman.

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