Wealth Check: A late-starter who needs to speed up

Despite getting into the advertising industry at 28, James Whitmore has risen to the top. He doesn't know which areas of his finances need attention

When James Whitmore was 28 he decided to change jobs. After several years in the production department of a national newspaper group he felt he would rather work in advertising. In 1987 he joined Young and Rubicam as a graduate trainee. "I'll always remember my boss was four years younger than me," he says.

Despite his late start, he swiftly rose up the ranks. After five years he was promoted to the board and, in 1999, was made managing director. When they merged with another company in 2002 to form the firm Mediaedge:cia Mr Whitmore was made managing director of the new firm.

The offices are on the south bank of the Thames in London. They do media and advertising work for clients including Nationwide building society, Reebok and the British Government. "We're not involved in the creative content side of advertising, more the intellectual stuff around that," says the 44-year old, "Our strategy is communication, planning and implementation." They place adverts for clients on TV, in newspapers and online.

He bought a £325,000 flat in London's Oxford Circus in April last year, which is now worth £450,000. Although he has moved in, it is still undergoing renovation for which he has earmarked £25,000 of his savings. He has a short tube ride to work every morning.

He also has a three-bedroom house in Exeter, bought in 1994, where he spends three weekends out of four. "As a child I moved around a lot and Exeter was where I spent the longest. I've got friends down there and I also support Exeter City." Mr Whitmore has a £295,000 Barclays open plan mortgage on his London flat with the Woolwich and £63,000 outstanding on his Exeter house.

He is part of his company's group personal pension. The fund's value is presently around £120,000 and is run by Deutche Asset Management. His company offers a flexible benefits scheme. He has opted for life cover, fully funded private health insurance and private dental care.

Mr Whitmore has three Isas and a Pep, spread over a variety of different funds worth about £30,000. He also has company share options which in a year should be worth about £30,000. He holds 180 Halifax shares.

"I've no idea what my outgoing are, I tend to spend what I earn," says Mr Whitmore, "I've never been motivated by money for money's sake and I've got no real idea in which areas I need financial advice."

We put his case to Philippa Gee, an investment strategist at Torquil Clark in Wolverhampton, Rachel McKenna, an associate director at Brooks Macdonald Financial Consulting in London, Darryll Connor, an associate sales director of Towry Law Financial Services in Bracknell, and Andrew Rockey, an independent financial adviser at Inter-Alliance Group in Plymouth.

Profile

James Whitmore, age 44

Status: Single

Occupation: Managing director of Mediaedge:cia

Salary: More than £100,000 per annum

Education: Degree in politics and philosophy

Motoring: None;

Debts: £63,000 mortgage and £295,000 mortgage

Savings: £50,000 in Barclays current account

Insurance: Private health insurance; private dental insurance; private doctor

Pension: Group personal pension (company scheme) funded to £35,000 a year. Current fund value is about £120,000

Stocks and shares: Isas and Peps worth £30,000; £30,000 share options due in a year; 180 Halifax shares

Property: Flat in central London (£450,000); house in Exeter (£250,000)

'Make your earnings and property work harder for you'

Solution 1: Property

Mr Connor says Mr Whitmore can choose one of his two properties as his principal private residence and avoid capital gains tax on its sale. It is important for him to consider which one to elect and should be based on which property he thinks will increase in value the most, and in which order he thinks he will sell. He should also ensure the validity of the insurance cover on the home in Exeter as it will be classed as a second home. Insurers usually apply extra terms and conditions if a house is left empty for long periods.

Ms McKenna says Mr Whitmore should use the £25,000 he has earmarked to renovate his flat to reduce his mortgage and draw down this money when they are required.

Solution 2: Savings

Mr Connor recommends an instant access account such as the Northern Rock Tracker Online for Mr Whitmore's savings, which pays 4.1 per cent gross.

Ms McKenna says as Mr Whitmore has fully funded income protection provided by the company, he may need to hold less cash in an emergency fund depending on the policy's deferred period (the period of time between him being unable to work and a claim starting to pay). As a higher rate taxpayer, he will pay 40 per cent on any interest earned on his savings so it would make sense to use his remaining funds to reduce the cost of his outstanding mortgages.

Ms Gee says Mr Whitmore should analyse his outgoings as any savings made could be easily transferred to reducing his mortgage balance.

Solution 3: Shares

Ms McKenna says Mr Whitmore should transfer his 180 Halifax shares into an Isa since he is paying tax at 32.5 per cent on the dividend. He should hold his share options until maturity and invest the proceeds as appropriate.

Ms Gee says Mr Whitmore should review his investments and decide if they are underperforming or there has been a change in fund manager that has not resulted in continued good returns. He should consider using money coming from his share options for debt reduction.

Solution 4: Pension

Mr Connor says although Deutsche Asset Management is an excellent investment house it would be prudent for Mr Whitmore to consider splitting the fund with another fund manager to spread risk.

Ms McKenna says Mr Whitmore needs to review his retirement planning because at his age a £120,000 fund seems low. Given his salary and the fact he is higher rate taxpayer, he should consider tax mitigation/deferral investments such as film partnerships, enterprise investment schemes and venture cap-ital trusts.

Ms Gee says it depends what age Mr Whitmore plans to retire. Does he plan to continue working as intensively as he is at present? Would he prefer to continue working into retirement, in some form of consultancy? These will all have a role in determining how appropriate is his level of pension provision. He should bear in mind his retirement does not need to be purely funded by pension plans; he can make good use of his other assets including cash, Isas, Peps and property.

Solution 5: Insurance

Ms McKenna says since Mr Whitmore's employer provides a comprehensive flexible insurance package he does not need private insurance. Being single, he has no real need for life cover so he should ask his employer to provide critical illness protection to cover his outstanding mortgage debt.

Ms Gee says the only major gap in Mr Whitmore's insurance is critical illness cover. To provide adequate cover to repay his mortgages in full and assuming that the cover would continue until age 60, Zurich Life quotes £155.87 per month for reviewable rates at the moment and Skandia Life is quoting £203.69 per month for guaranteed rates. However he may feel he has resources not to need this type of cover and by saving the £150 to £200 each month into a high interest savings account he would certainly be more secure. One such account would be the Telephone Plus account offered by Birmingham Midshires, which offers a variable rate of 4.2 per cent on all balances more than £1,000.

If you would like to be given a financial health check-up, please write to: Wealth Check, 'The Independent', 191 Marsh Wall, London E14 9RS, or e-mail cash@independent.co.uk.