Jill Kerby: Widow, rock star have more in common than they think

You wouldn’t think a widow and a rock star have much in common, but they do.

You wouldn’t think a widow and a rock star have much in common, but they do.

“I am a widow for the past seven years,” the long and chatty letter from Mrs AL began.

“My husband died at age 59 and left me a very small private pension of only about €8,000 a year, but he was convinced over the years to buy bank shares (nearly €200,000 worth when he died), the children were grown and the house was paid for. I had been working and though I now receive the widow’s pension I never had a pension of my own and I’m afraid I’ve only about €15,000 worth of our cash savings left (out of €50,000).

“The house was once valued at nearly a million but I’m told I’d be lucky to get half a million for it now and I’m sure you can guess what happened to the bank shares. I wish I had sold them in 2005, but there’s no point in crying over them now.

“The house is up for sale – my €12,000 pension will only start next year when I turn 66 (when did that happen?) – and I will buy something much smaller to live in. I hope to have at least €300,000 left in cash and my pensions of €19,000.

“I’m not very good at budgeting but love to travel and my children say that I am very extravagant but I will be cutting back. Right now I’m very concerned about what will happen to the euro.

“I’m sorry I didn’t take your warnings about property prices and the euro sooner, but I think I need a plan to protect the money I get from the house as I will have to live on this.”

This reader is a lively, interesting, well-educated middle-class woman (she was a medical secretary after her children left school) isn’t untypical of many widows I’ve spoken to or met over the years whose husbands were the main breadwinners and would have solely provided for their retirement.

Had the crash of 2008 not occurred, this widow’s financial position would be much more secure than it is today. Not only has the value of her bank shares collapsed, but so has the value of the family home she must now sell.

Because her husband died prematurely, the widow’s pension is also much less than she and her husband expected (but is still quite large as typical self-employment pensions go.)

Mrs L needs good independent financial advice. But before she speaks to an adviser, she needs to prepare a simple, clear two-page report that includes

• all her income/debt, including pension income

• how much tax she pays (if any)

• an up-to-date statement from her stockbroker

• her savings/accounts and interest payments

• an accurate account of her domestic expenses, especially insurance and utility contracts

• an accurate account of her discretionary spending

• any property valuations she received when she put her house up for sale

Such a statement of affairs means that Mrs L won’t waste the adviser’s time and her own money. With this sort of clarity, the adviser can then tease out her long-term financial needs, her expectations for her money and most importantly her understanding of risk and reward.

Many good advisers are working to protect clients with large sums of cash from a possible euro exit here in Ireland. They are doing this purchasing short-term German bonds and/or diversifying the cash into other currencies or currency funds. Some recommend a small purchase of gold/silver to offset the huge amount of central bank money printing to support the weak euro and bail out the increasing number of bankrupt EU banks.

Mrs L will be under no obligation to take the advice that she pays for. The advantage of dealing with a fee-based adviser, as opposed to one who is only remunerated by the financial services companies with which he/she must have a sales agency, is that the client is under no pressure to buy a recommended fund or product.

Instead, with a professional review and set of recommendations in tow, Mrs L can consider her options carefully or even take the review to another experienced and hopefully, trustworthy adviser, for a second opinion. She may decide to do nothing at all, in the knowledge that she now has a better understanding of her position and the consequences of even making that decision.

The best reason Mrs L should go to a good adviser and pay that person a fair fee for their time and expertise is that the learning experience alone will give her more confidence in keeping track of her (hopefully, property invested/protected) finances in the future.

She’s in good company.

After the revelation in the court last week about how U2 star Adam Clayton handed over access to his vast bank accounts for years to his former housekeeper shows just how tempting for all of us to want to avoid taking responsibility for the management of our hard-won earnings.

Mr Clayton decided that dealing with his day-to-day money dealings – paying utility bills, tradesmen, keeping his house in groceries and furnishings, booking flights – was a distraction and not something an artist should need to waste his time on.

Ordinary folk, who don’t make their own financial decisions and don’t pay for advice on how to do so, regularly hand their money over to life assurance salesmen, bankers and stockbrokers. Adam Clayton gave access to his vast earnings to a stranger, never bothering to check for years that his trust wasn’t being abused. It ended in tears.

Mrs L has a chance to avoid that outcome.