In recent years we have seen many law firms roll out impressively comprehensive programmes to support employees’ mental and physical wellbeing.
But according to many of our clients working in the legal sector, one area of wellbeing is notable by its absence from the sector’s support initiatives: financial wellbeing.
It may sound strange to highlight support for financial wellbeing as a gap in an industry where earnings can be considerable. But it’s a topic that will be of concern to plenty of lawyers who are on track for partner, with the financial demands that the role entails.
And our latest research among lawyers and other high-net-worth individuals presents an important finding for those on the career ladder: the factors that drive financial wellbeing go far beyond just pounds and pence.
We wanted to understand which factors individuals see as most important to having a sense of financial wellbeing and how able they feel to achieve those factors. Participants rated these factors out of five. Our analysis revealed some significant shortfalls.
Younger professionals struggle most to attain financial wellbeing
Some of our most striking findings come from the 36-49 age bracket: the group most likely to include new partners or lawyers on the path to partnership. Those in this age group have a shortfall in their ability to achieve almost every factor that drives financial wellbeing, compared to the importance they place on it – most notably, more emotional factors such as ‘feeling happy with the state of my finances’ (shortfall of 1.25pts), and ‘having wellbeing in other walks of life, eg mental, physical’ (shortfall of 0.96pts).
Younger lawyers struggling most to attain true financial wellbeing are at a critical point in their financial journey. They are accumulating wealth but typically face significant time pressures. As a result, finding the time to plan financial matters effectively becomes the ‘stone in the shoe’: a bugbear, and impossible to ignore, but rarely the most pressing issue to be addressed.
Younger lawyers also face a significant financial leap when making the investment required to become a partner. Many will take out a matching loan, which is normally tax-efficient and at a reasonable rate. Nevertheless, the prospect of taking on this financial commitment can understandably seem daunting to younger lawyers and can negatively impact their financial wellbeing.
Achieving true financial wellbeing is not easy. After all, wider changes such as a dramatic increase in income tax, a sharp economic shock, or tectonic political shifts are always going to be factors beyond our control. But financial wellbeing is not an impossible goal. There are two important steps younger lawyers (and partners) can take.
Use financial plans to drive wellbeing
Firstly, recognise the importance of time in setting financial plans. Having a clear set of financial objectives ranks as the most desirable factor in boosting financial wellbeing among under-50s. But many must also manage significant time pressures – both at work and in their personal lives. This lack of time creates other obstacles to financial wellbeing.
Our recommendation? Invest time in creating a proper set of financial goals. In doing so, build wellbeing goals into your plans. Creating a cashflow forecast and reviewing income and expenditure needs regularly are critical to establishing a firm financial grounding in the face of bigger uncertainty. After all, it is much easier to be buffeted by storms if you don’t have a sense of which direction you’re supposed to be going.
Seek support to boost financial wellbeing
Secondly, find ways to reduce the personal burden of managing finances. Legal professionals we spoke to told us that having a clear set of financial objectives, and receiving guidance on when they achieve financial independence, would greatly enhance their sense of financial wellbeing. But they also said they would value regular discussions around financial wellbeing, both with an adviser and with their family.
Many people turn to family first when discussing other forms of wellbeing. Why should finances be any different?
Use time to focus on other forms of wellbeing
Seeking support such as financial advice can provide clarity and comfort that you are heading in the right direction. Reducing the demands on you to tackle this alone will give you back time to focus on the most important factor of all: improving wellbeing in other walks of life. This is particularly relevant for those busy with careers, who can’t dedicate all their time to proper financial planning.
After all, if financial wellbeing goes beyond pounds and pence, many could do worse than to delegate those worries elsewhere – and focus on the elements that truly matter.
Gareth Parsons is financial planning director at Saunderson House.
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