Five things lawyers should be asking their financial consultant

Lawyers across the country have had to adapt to the changing work environment due to the coronavirus outbreak.

From setting up home-based legal counsel operations to conducting court hearings over audio or video links to comply with social distancing guidelines, there’s no doubt that the ongoing crisis has had a significant impact on the legal sector.

On top of the concerns they have about how they best serve clients, the current pandemic may also be having an impact on their personal finances.

Here are five questions that every lawyer should be asking their financial consultant when it comes to navigating through the current climate.

What should I do about protection cover?

The impact of coronavirus will have put the importance of protection front of mind, and you may be considering how you can ensure you have the right support in place.

As a first step, it’s important that you understand what personal and professional protection you already hold, including any existing policies and employer benefits.

From here, you can then assess whether the solutions you have meet your current or anticipated needs, and determine where you may benefit from additional cover.

One area to consider is income – specifically whether you have a plan or a solution to help meet day-to-day costs, bills or outgoings like mortgage payments – in the event that you are unable to work.

Lawyers may be entitled to benefits including sick pay, within the scope of their benefits.

While the degree of sick pay and additional benefits packages will vary depending on whether a lawyer works in the public or private sector and differ from firm to firm, they may only provide support for a relatively short period of time. A solution like income protection could prove valuable, providing you with continued income to replace a proportion of your earnings if injury or illness prevents you from working.

Finally, in an effort to cut costs amid coronavirus pressures, some lawyers may be considering cancelling protection policies they currently hold.

When it comes to examining areas where cost-reductions can be made, protection should generally be marked as a ‘no-go’ area if it’s possible to do so – particularly considering the current environment of ongoing uncertainty.

What should I be thinking about when it comes to mortgages?

Although the outbreak has caused significant disruption to the housing market, lenders are continuing to offer mortgages.

If you’re looking to buy a property, you should first carefully consider the full range of mortgage options available to identify the right solution for your current, or future, circumstances. Here, your financial consultant will be a useful source of advice.

A low interest-rate environment makes now a good time to consider re-mortgaging – a process that could help you save money by securing a better mortgage deal or help you avoid facing potentially higher costs should your current deal be coming to an end.

Some lawyers, or their partners, may have been furloughed in recent weeks and will be concerned about how this will affect their ability to secure finance.

It’s important to remember that it is still possible to secure a mortgage or carry out a re-mortgage application in these circumstances, with lenders available that will accept and assess mortgage applications using income received through the government-backed Coronavirus Job Retention Scheme (CJRS).

If you already have a mortgage offer agreed, it’s advisable that you check with your lender to make sure that the offer is still valid, and take the time to review whether the level of borrowing you have agreed remains right for you. Should your financial circumstances have changed due to the outbreak, a previously agreed arrangement might no longer be suitable.

What does coronavirus mean for my investments?

Coronavirus has had a wide-ranging impact on investments.

If you don’t need to access cash tied up in your investments immediately, it’s recommended that you leave invested funds untouched, giving them a chance to recover some value when markets improve. As with any investment activity, it’s important to remember that the value could go down as well as up, and that you may get out less than you put in.

If you have additional cash available, now could be a particularly good time to look at how you can make it work harder for you through investments.

Before investing, it’s important that you consider how current market conditions align with your appetite for risk, and consider whether you can afford to commit your funds. Investing is generally carried out over periods of five years or more, and may not be for you if you anticipate needing to access invested money in the immediate future.

Speak to your financial consultant before making any decisions to help understand the right course of action for you.

What does this mean for my pension? Should I access it now?

If you were planning to retire during the outbreak, or are looking to alter your retirement plans as a result of current conditions, it’s important that you first speak to your financial adviser to help understand the implications of any decision, and to determine whether this is the right time to proceed.

In this climate, some lawyers – who are eligible to do so – may also be considering drawing down pension funds to support personal cashflow. It’s essential that you consider the longer-term implications this could have.

Given current market performance, withdrawing funds now could mean getting less out than six months ago and potentially less than what you might receive in six months to come.

Your circumstances, or those of your retirement investments, may have changed, and your financial adviser will be able to offer guidance on each available option.

What else should I be doing to support my finances?

Given the events of recent months, lawyers may now be exploring further ways that they can support their personal finances and prepare for any further disruption.

One option is to consider any payment holidays available from your lender that would temporarily reduce or suspend repayments.

If you haven’t already done so, now could also be a good time to consider building an adequate ‘emergency fund’ to help weather any future financial headwinds.

We would recommend that this is large enough to meet a minimum of three months of net household income, or around £15,000, whichever is lower.

As with any financial decision, it’s important to consider the longer-term implications that this could have for you – your financial adviser will be able to help you assess whether it’s right for your individual circumstances.

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