A Financial Plan for James Bond
Watching the latest James Bond movie recently got us thinking – what if James was our client? How would we advise him and what kind of financial plan would we put together to help him achieve his goals? While Mr. Bond was risking his life for Queen and country we were thinking about his finances and what a 007 financial plan might really look like.
Understanding Mr. Bond
An essential part of financial planning is ‘fact finding’. This is where we really get to know our clients. We go through their finances and also get to know them as people. We really need to know our clients as well as (if not better than) they know themselves. What makes them tick? What are their hopes, dreams and fears and what are they really trying to achieve? This might be tricky with this particular client as he is notoriously secretive and gives little away. Hopefully, after a martini or two (or maybe just a few strong cups of coffee) at our office, we’ll get a good handle on Mr. Bond and really get to the bottom of how we can help him.
According to one estimate, Bond (or Royal Navy Commander James Bond, CMG RNVR to give him his full title) is likely to be earning between £65k-£80k as a basic salary. A typical ‘field agent’ at MI6 is more likely to earn £30k-£40k but we should assume Mr. Bond is on a Navy salary. Still, this is some way short of the reported £39m (including endorsements) that actor Daniel Craig banked for playing Bond in Spectre.
Mr. Bond is independently wealthy and didn’t appear to join the military or secret service for monetary gain. He attended an elite-fee paying school, owns a luxury car or two and has a servant. Bond was orphaned at the age of 11 when his parents died in a mountain climbing accident. It is, therefore likely that Bond inherited significant sums (probably millions in today’s money) so has a fair amount of wealth behind him. In the Bond novels, it states he lives in a flat near to the King’s Road in Chelsea. The average cost of this type of this type of property in this area is now around £800k. Bond will have enjoyed significant capital appreciation in the value of his property over the past number of years,
A recent article quotes a figure of $1.5m (£1.2m) is needed to live the ‘Bond Lifestyle’. This is based on his toys and other luxuries in the move Spectre. Whatever the cost, it’s clear that Mr. Bond has a pretty good lifestyle that comes with a pretty hefty price tag. Some of this may be on the fictional ‘expenses’ of MI6 but in reality, little of what Bond gets up to could legitimately be put on the expenses of a public body. There’s a great 2-minute video on the cost of Bond’s lifestyle put together by Tech Insider that’s well worth a quick watch.
Mr. Bond may well have investments. When it comes to a great investment strategy a lot of this comes down to ‘risk’. Assessing the right amount of risk for someone to take is crucial. Take too little risk and long-term returns can suffer. Too much risk and the client may get really worried when their investments fall (as they inevitably will from time to time) and may lead them to switch into cash (the worst strategy when markets tank). So what of Mr. Bond? Well he’d surely have an ‘aggressive’ attitude to risk and a really high tolerance for risk, right? Yes, but risk is more than just about the ‘appetite’ for risk. A good financial planner will also take into account the ‘investment horizon’ (how long the investment will remain in place), ‘capacity for loss’ (whether the client has any financial safety net in case their investments lose value) and ‘risk required’ (what risk the client actually needs to take to achieve their goals) amongst other factors. On these front, it is less clear what good advice to Mr. Bond looks like and this is where a great ‘fact find’ and really understanding him comes in.
All MI6 employees are part of the ‘Civil Service Pension Scheme’. Like many public pension schemes, it has become less generous to new joiners in recent years as the cost of funding has rocketed due to an ageing population. This won’t be a probably for Mr. Bond as he joined many years ago. His pension is likely to have a ‘normal retirement age’ of 60 and be based on his ‘final salary’. This pension is a ‘1/60th scheme’ – meaning Bond accrues 1/60th of his final salary for each year worked. So after 40 years’ service, he could get 40/60ths (2/3rds) of his final salary as a pension. Bond will pay in 1.5% of his salary for the pension. That’s a pretty good deal.
Employee benefits package
MI6 say they offer a good ‘work/life balance’ and it certainly looks like Bond makes the most of this in his movies. They provide flexible working hours which clearly suits bonds extra-curricular activities (all in the pursuit of his work of course). MI6 also provide discounted healthcare and 25 days holiday a year – enough to unwind from the stress of operations. Should Bond ever become a father, he’ll also enjoy a childcare voucher scheme and shared parental leave. We’re not sure he’ll ever use the ‘cycle to work scheme’ – likely preferring a fast sports car or motorbike no doubt.
Bond is single (although he was once married to Tracy Draco) and has no financial dependents (as far as we are aware) so he won’t need any life insurance or critical illness cover. That’s pretty lucky as no insurer who knew how dangerous his job was would likely insure him – at any price. The other big insurance cost (if he’s ever tried to actually get any) would be for his vehicles. A recent article suggests that Bond’s annual car insurance bill would be in the region of £1.5m (based on Spectre). Most of that is the cost of insuring his Jaguar C-X75 at a whopping £123,500 a year. Whatever wealth Bond has, he’s likely to burn through it quite quickly based on those numbers. Maybe it would be sound financial advice to suggest a more modest Ford Mondeo or similar.
Wills & inheritance tax planning
It’s unclear who Mr. Bond will leave his estate to when he does die one day – it that day ever comes as he seems pretty difficult to kill. If Bond’s expensive tastes and associated bills don’t reduce his estate below the Inheritance Tax allowance, he could have a bill to pay. He’d be wise to think about this now and consider formalising or updated his will and looking at planning to minimise his inheritance tax bill by using trusts or gifting some assets.
So what does Mr. Bond’s financial plan look like?
There are a lot of unknowns when it comes to Mr. Bond’s financial planning needs and the best course of action to advise. If we can get to the bottom of his current situation and objectives with a thorough ‘fact find’ will be on our way to starting a great plan for him.
The next step would probably be to develop a ‘lifetime cash flow model’. This would show Mr. Bond’s assets, liabilities, income and expenditure and project this forward to show how his financial position may change in the future. This would probably show his high expenditure eroding his wealth at an alarming rate and we’d probably have to advise him to rein in his spending a bit.
However, if he does ever get short of money, a quick trip to the local casino should see him right.
Back to reality
Back in the real world, we all don’t have these same fortunate traits of Mr. Bond. We will die. There is a good chance that we won’t be able to work due to an accident or illness. We do age and will probably want to retire. We know that we need to save and invest if we want money to be available when we need it. Now this might sound a little scary but it really isn’t. What is scary is not having a plan in place in case you are unable to work or die unexpectedly or for when you want to be able to stop working. A good financial plan will cover all these considerations; protecting your family should the worst happen and securing the future lifestyle you want.
They may not make a film about it, but trust us; having a proper plan in place is really exciting!
If you are interested in having a conversation about some of the benefits of having a proper financial plan then please don’t hesitate to get in touch.