A summary of needs report explained

A summary of needs is an important part of financial planning. In this post, we explain what it is and how it works, and why it is important.

What is a summary of needs?

A Summary of needs report looks at where you are today and where you aspire to be in the future. It takes into account assets, such as wealth and income, set off against liabilities, such as debt and dependents. We use a summary of needs as a way for you to get a complete overview of your financial situation.

A summary of needs also records both your long- and short-term goals. This is an important step toward building a suitability report.

How does it work?

The first stage of composing a summary of needs is completing a comprehensive fact find. In investment planning, this is commonly referred to as know your client (KYC). By asking you a set of questions we will have a clearer understanding of what you are trying to achieve from a financial perspective. A Fact find will also give us an insight into challenges that you may face when trying to implement a plan to achieve your financial goals.

What questions will we ask?

• Investment objectives. We will ask about your investment goals. This is to determine whether you are looking predominantly for growth, income, or a combination of the two. We will also try to quantify this, to better understand your investment needs. For example, your objective could be to generate an extra £1000 per month to supplement your income.
• Investment purpose. We will ask the reason behind your investment goals. This is finding your whys. Maybe you have a life event like retirement on the horizon and need to build up capital, or maybe you want to restructure investments for passive income. When we understand your purpose we can look at ways for you to fulfil your requirements.
• Financial overview. The next stage of the fact find is to get a clear picture of where you are financially. By recording your income and assets against your expenses and liabilities we can see how far away you are from achieving your financial goals. We now have a clear understanding of the resources that you have available to invest to achieve your goals.
• Taxation. Before giving advice we must know your tax status. If you are a higher rate taxpayer we can show you ways to structure investments to minimise your tax obligations. Alternatively, if estate planning is important to you, we can make suggestions on how to structure investments to minimise IHT in the future.
• Risk Profile. We will establish your risk profile, to determine which types of investments are suitable for your investment needs.
• Type of investor. Do you want to be a hands-on investor and manage the property yourself? Or would you prefer a more passive investment?
• Mortgage finance. Are you looking at using a mortgage to fund a property? We can explain the advantages and disadvantages of mortgage finance and how it alters an investment’s risk profile.

What happens next?

Your consultant has now completed the first stage of your investment review. This first stage is referred to as a KYC, where your consultant has recorded your risk profile, current situation and investment goals.

Your consultant will now recommend that you look at certain investments that he or she feels fit with your investment needs. Essentially, your consultant is applying their knowledge of investment products to find the best solutions to help you achieve your investment goals. Particular attention will be given to your risk profile to ensure that you only incur the level of risk that you are comfortable with. Perhaps more importantly your consultant will let you which products to avoid as they are misaligned with your investment needs.

You can see then that a summary of needs is important as it is the document which your consultant will use to make formal investment recommendations.

Summary of needs report

Within 3 working days of taking an investment review, your consultant will compose a summary of needs report and send it to you via email. The report will include an outline of the key points discussed in your investment review. It will include your current financial situation, your attitude to risk and your financial goals.

When reading your report, if you feel that information has been recorded incorrectly, or your risk profile or goals are not a true reflection of your investment objectives then we want to know. This is to ensure that we give you the best advice.

Suitability Report

If you decide to purchase a property or other investment as a result of our advice, you will receive a suitability report. This report will build on your summary of needs report.

A suitability report matches your investment needs with an investment product that will help you fulfil those needs. The report will justify why the recommendation was made. It will also explain any risks that the product has. You can find out more about how we conduct a suitability report by clicking on the link provided.