Brian talks to Mike Wilson about how the advice process can be tailored to meet the specific needs of service and ex-service families
I’ve always had an affinity with those who sign on the dotted line for Queen and Country. And for good reason. They tend to be very good delegators, are quick to learn, and are very loyal. But, as an adviser, I find that both ex and current military personnel often have different planning needs and financial circumstances compared to many other clients. And sometimes it can take a bit of inside knowledge from us as their advisers in order to help them make the most of their situations.
That’s where my years with the forces help to complete the picture. I joined the Army in the 1990s after having spent time living in the Middle East and travelling through Eastern Europe – about the same time as the Berlin Wall fell, something I’m sure you will remember. Although I was eventually war-pensioned out after an injury, the forces remained an area of special interest to me. These days, being based in Wiltshire, we are well placed to deal with a substantial number of serving and ex-servicemen; and then there’s also the fact that Wiltshire will soon be home to a large part of the Army relocating from Germany.
The military structure
Maybe we should start our look at this particular sector from a somewhat basic level. The military is broadly split in to three parts: The Naval Service (made up of the Royal Navy and the Royal Marines) the Army and the Royal Air Force. There are other parts of the Ministry of Defence, such as the Royal Fleet Auxiliary which is a civilian-manned fleet supporting the Royal Navy. All Arms have a reserve, or part-time, element such as the Army Reserves.
All the armed forces split their personnel into commissioned officers, non-commissioned officers and other ranks. Each service has its own rank structure – a factor which can make it challenging for the uninitiated adviser to know just how senior the client sitting in his office is (or was). And it’s the client’s final rank, more than his final salary, which has an impact on his (or her) pension entitlement.
Then there’s the tendency of those serving to train within different roles and to move between units, or even between different Arms. For example, Prince Harry originally commissioned from the Royal Military Academy Sandhurst into the Blues & Royals in 2008, but then moved on to the Army Air Corps in 2010. The various pension options along the way are also going to be unfamiliar to some advisers: it is possible, for instance, to transfer a military pension to another scheme that is a member of the Public Sector Transfer Club, and that may cause complications with recalculating the Annual Allowance.
It’s no great surprise that military personnel can spend many months on operations abroad, and as a financial adviser you need to be flexible with your meetings and to embrace technology to keep the relationship running. The client might have been seconded to a unit based in the USA, sent on operations in Afghanistan, or posted to Cyprus for two years. But he won’t be in your office for his six-monthly reviews. This is something you’ll need to work around.
There are some key financial planning areas where specific knowledge is required and I shall highlight some of them here.
The topic of school fees is a topic which comes up regularly with clients, and for obvious reasons. The Continuity of Education Allowance for Service Children (CEAS) assists service parents with the continuity of education for their children, which would otherwise be lost due to their parent moving with the job. Parents can apply for a CEA Certificate which evidences their entitlement to financial support with their child’s education and, if necessary, boarding. CEAS is typically worth £5,719 – £7,245 per term, although children with special needs have additional funding.
If you need the details of allowances, these can be found in Joint Service Publication 752 Part 2. But there are also many schools which offer discounts and bursaries for the children of service personnel – you can find a list at http://serviceschools.co.uk/cms/armed_forces_awards/.
Armed Forces Pension Scheme (AFPS)
Suffice it to say that armed forces pensions are not straightforward and need an expert eye. Upon leaving the forces, personnel may be entitled to a number of different payments, such as pension payments and Early Departure payments. And as an adviser, you need to know your way around them.
There are 3 AFPS schemes: 75, 05 and 15 – referring to the year in which they came in. It’s not uncommon for personnel to be members of more than one scheme. Any pension benefits accrued before the 2015 scheme came into place are protected. Pensions earned before 2005 are payable when the individual reaches age 60, however, like the state pension, individuals have to claim it, as payment won’t be made automatically. Members can be entitled to a tax free lump sum, called an Early Departure Payment Lump Sum or a Terminal Grant.
I often encourage service personnel to join the Forces Pension Society, as it does a sterling job of fighting for the pension rights for them and their beneficiaries.
You will find that proportionately more of your military clients will be married than their non-military counterparts, especially those under the age of 30.
It’s a commonly held belief that divorce rates within the UK military are higher than in ‘civvy street’. Although it has been shown, unsurprisingly, that marital difficulties are more likely where there has been a deployment of 13 months in a 3-year period, divorce rates are no higher with military personnel for those over the age of 30.
Divorce lawyers do tend to target military pensions, and they can often take a real hammering. One of my clients had experienced a loss of 85% of his military pension following a divorce some years previously! Cashflow planning is a critical, non-negotiable part of our work with all of our clients, especially where divorce is concerned.
Military clients are a real pleasure to deal with. If you and your business are looking to specialise in this area, my tips on how to go about it are quite simple: ‘tell it straight’, know your stuff, be clear and transparent, and have a methodical structure with momentum. That way you’ll be best placed to resonate with those with whom you hope to build a long-term planning relationship, to your mutual benefit.
Brian Hill is MD of Jones Hill, an Independent Financial Advice practice based in Bradford on Avon in Wiltshire. Jones Hill operates a flat, fixed fee structure for all financial planning clients, both for the initial work and ongoing (they call it OnTrack).
You can hear more about Brian’s approach to financial planning in an interview with the Financial Planning Training Academy. Brian also provides nonverbal communications training for Financial Advisers though Kinesics Method