The Stapleton family were existing clients of Heron House but asked us to provide financial guidance to their son who had become involved in difficult overseas property purchases. The son required a loan from his parents and although they were happy to help, wanted advice from us before handing over the money.
We arranged a meeting with their son to get a full explanation of his personal circumstances and map out in detail the financial implications of his property deals. It became clear that their son had not undertaken an appropriate risk assessment of these property transactions and it was inappropriate for him to continue with these deals as his assumptions for future income and potential longer-term capital growth on these assets was wildly unrealistic.
On the basis of this risk assessment and given due consideration on how it would adversely affect his parents’ own personal financial circumstances to hand over a significant loan without a clear repayment schedule, it was recommended that the parents did not support their son in these ventures. It was strongly recommended to their son that he cut his losses at this point to avoid ‘throwing good money after bad’.
We clearly outlined to the son why we could not recommend his parents assist in this venture. We also explained the adverse impact any loan would have on his parents’ personal financial plan to assist him, even though they would be greatly disappointed not to help him out. Their son understood and respected the reasons why the advice was given and consequently pulled out of one of the property deals. He now has a much more stable and sustainable long-term financial situation.
Within financial planning it is important that the interaction, both personally and financially, between parents and their children is clearly mapped out and understood by all parties to ensure that no single party can adversely affect the future financial plans and lifestyle planning of other family members.
Since this meeting with their son, his brother has also arranged a financial planning meeting and we have been able to assist him with his own tax planning. The resolution of his tax issues has provided further peace of mind for his parents, as they were concerned about his ability to afford the outstanding liability.
Their sons’ financial issues were adversely affecting their parents’ comfortable retirement lifestyle and providing them with peace of mind has greatly enhanced their wellbeing.
