I toyed with providing a definition of NOT-Financial Planning, but I hope that it will be evident from the remainder of our discussion.
The Financial Planner’s primary responsibility is to be a catalyst for
completion of the initial process and managing ongoing
maintenance of the plan. Clarity is gained by both client and planner
during this process, and that clarity is used to view potential future
courses of action. Implementation is generally phased, but the
integration achieved through the financial planning process helps
minimize unintended outcomes associated with actions taken
without context to related areas of your plan. By regularly reviewing
various aspects of your plan is a rotating agenda, the plan can
This is one page of nearly innumerable reasons, which in my experience are unique to your individual situation. Something that often occurs during the initial stages of building a financial planning relations is an epiphany about something we didn’t think about before. Notice that none of the above allude to a specific product or service-only to issues and implied strategies to address those issues.
How do you know if you could benefit from the services of a financial planner? You may not have the expertise, the time or the desire to actively plan and manage certain financial aspects of your life. You may want help getting started. You may benefit from an objective, third-party perspective on what are often emotional, difficult decisions. And in today's hectic world, it can be beneficial to have a financial planning expert help to make sure you stay focused and follow through with your financial plans.
The previous slide indicated reasons to plan. This slide lists some agenda items that may point you toward using the services of a financial planner.
One “pure” measure of a financial planner is what he/she delivers in the process of planning. Another is compensation. In some practices (very few, to my knowledge), planners are paid solely for planning; fee-based, fee only. They do not implement, they only plan and advise regarding implementation, carefully avoiding the inevitable conflict of interest that results with implementation (especially when one gets paid for products and services implemented). True independence from outside conflicts is something the public both wants and understands. It is also extremely difficult to achieve.
Back in 2006, the annual Moss Adams study of advisory firms revealed distinct differences in the success of advisory firms depending on what they called themselves: Financial Planners, Investment Advisors, Investment Managers, or Wealth Managers. Moss Adams did not screen the responders to determine whether their firms did, in fact, meet any definitions for these descriptions; they simply asked how firm owners described their firms in the marketplace, and then compared the total results of each group. What they found was striking: the firms calling themselves ‘financial planners’ averaged substantially more clients and substantially lower total AUM, AUM per client, total revenues, operating income and income per owner than the other three firm descriptions. This illustrates a challenge to the profession of Financial Planning. Not only is the very limited barrier to entry to the business, most people don’t go shopping for financial planning—they usually have an immediate concern that they want to solve, which can lead to a “silo” approach to planning—solving issues independently while failing to account for the connectedness to other facets of one’s life.
I attempt to lead with planning, even when confronted by clients who wish to solve a single problem right now. It doesn’t always work, and not all of my clients have a comprehensive plan. Nevertheless, maintaining a mindset that comprehensive financial planning benefits clients, I tend to weave financial planning concepts into conversations with my clients. For example, it is not uncommon for people to come to me for help with their 401k, which leads to a discussion of beneficiaries, further leading to an estate planning talk, incorporating long-term care planning, business continuation, health care, etc., etc.
Regardless of the title one chooses to apply to their practice and haw they choose to be compensated, financial planners must disclose to their prospects and clients very clearly how they approach their practice, presenting information such as that contained in ADV forms, with an eye towards helping clients understand the conflicts of interest inherent in their relationship with the planner along with the methods the planner uses to mitigate those conflicts. I believe that the CFP™ designation is the most widely recognized identifier of financial planning professionals. Other designations may signal to the public a particular area of expertise. I have strategic relationships with Chartered Financial Analysts (experts in analyzing and managing investments), CPAs, attorneys, and other specialists who are
uniquely qualified to add value to my client’s financial needs, helping to further integrate the plan. (see slide 10 below)
From the board’s website: CFP®professionals are dedicated to using the financial planning process to serve the financial needs of individuals, families and businesses. Most CFP professionals have earned a four-year college degree in a finance-related field, and have completed a course of study in financial planning approved by CFP Board. To earn the prestigious CFP®certification and remain certified as a CFP professional, individuals must meet four main requirements.
Certification Requirements
Examination-CERTIFIED FINANCIAL PLANNERTMProfessionals must successfully complete CFP Board's comprehensive certification examination, which tests an individual's
knowledge on various key aspects of financial planning.
Experience-CERTIFIED FINANCIAL PLANNER Professionals must acquire three years of financial planning-related experience before receiving the right to use the CFP certification marks.
Ethics-CERTIFIED FINANCIAL PLANNER Professionals must voluntarily ascribe to CFP Board's Code of Ethics and additional requirements as mandated. CFP practitioners who violate the code can be disciplined, including permanent loss of the right to use the CFP certification marks. W
hen it comes to ethics and professional responsibility, CFP® professionals
are held to the highest of standards. They are obliged to uphold the principles of
integrity, objectivity, competence, fairness, confidentiality, professionalism and
diligence as outlined in CFP Board’s Code of Ethics. The Rules of Conduct require
CFP® professionals to put your interests ahead of their own at all times and to
provide their financial planning services as a “fiduciary”—acting in the best interest
of their financial planning clients. CFP® professionals are subject to CFP Board
sanctions if they violate these standards.
Education-CERTIFIED FINANCIAL PLANNER Professionals must complete 30 hours of continuing education every two years to stay current in financial planning knowledge, including ethics.
Compliance with these four areas informs you that an individual who holds the CFP certification mark is well prepared and qualified to give sound, professional advice.
I completed the CFP™ designation in 2000 and have maintained the designation since that time. I also hold two designations from the American College, one, ChFC, is similar to CFP™. The other, Chartered Life Underwriter, is focused on how life insurance products are integrated into the planning process. In the mid 1990’s, I chose to pursue the path of supervising other licensed financial services professionals. I have found that my preparation and execution of this duty has helped me maintain an enhanced view of current trends affecting the profession and how financial planners can best approach our business while focusing on a high level of client service.
As stated earlier, my primary responsibility in a financial planning relationship as being a catalyst to action. I feel that in order to deliver the best possible financial planning, I must use my knowledge and skills, and know that I don’t know (or at least that I’m not licensed to perform) areas of specialization better provided by others. While it is not my priority to replace existing advisors or relationships—in fact in many cases I work with the
professionals clients already have in place--it is critical that my client and I understand and appreciate the willingness of other professionals to work with as little conflict as possible and as much cooperation as necessary to serve clients needs. If my job is to lead a
coordinated approach, I must have coordinate-able colleagues who appreciate the concept of integrated, comprehensive planning. Sometimes we meet together with our client and other times individually, but we understand that we must work together in the spirit of fiduciary and professional responsibility to our client first and above our individual interests.
The above is a graphic representation of how I apply the CFP Board of Standards
outline for THE FINANCIAL PLANNING PROCES S
Again, from the Board website: Coming up with a solid financial plan means doing
some homework—both on your part and the part of your CFP® professional. From
examining your current situation, to setting goals, to deciding how to measure your
progress, a CFP® professional is uniquely qualified to take you through the financial
planning process.
In six steps, you and your CFP® professional will:
1.
Agree on how to work together-Your CFP® professional will explain the
services he’ll provide and define each of your responsibilities. Along with
compensation, you’ll discuss how long the professional relationship will last
and how you and he will make decisions.
2.
Gather information about your finances and set goals-You and your CFP®
professional will talk about your current financial situation and gather any
necessary documents. Together, you’ll define your personal and financial goals,
including timeframes. You may also want to discuss your comfort level when it
comes to taking financial risks.
3.
Analyze and strategize-Your CFP® professional will take all your finances into
account and determine how to meet your goals. Her analysis may cover your
assets, liabilities and cash flow, current insurance coverage, investments or tax
strategies.
4.
Develop recommendations-Next, your CFP® professional will go over his
financial recommendations, explaining the rationale so you can make informed
decisions. He will address your questions and concerns and revise his
recommendations if necessary.
5.
Put plan into motion-You and your CFP® professional will need to agree on how
the recommendations will be carried out. Your CFP® professional may carry out
the recommendations herself or serve as your coach, coordinating the process
with you and other professionals.
6.
Monitor progress and stay on track-As you work towards your goals, you and
your CFP® professional will need to decide who will monitor your progress to
make sure you’re staying on track. If the planner is in charge, he’ll check in from
time to time, reviewing your situation and making any necessary adjustments to
his recommendations.
The discussion outline provides observations, analysis, and possible future actions. The implementation schedule outlines a suggested sequence of steps to take to execute actions, subject to mutual agreement between planner and client.
The investment policy statement incorporates institutional perspectives as they may apply to and individual’s portfolio. While personal timeframes, preferences, and requirements my differ from institutional principles, the IPS provides additional clarity as to what is being recommended and why. In conjunction with the Finametrica risk tolerance evaluation, the IPS provides the client with information on which to based their investment decisions. Moneyguide Pro™ provides the analytical modeling to assist the client in projecting how their current course of action compares with an optimized plan. It provides a visual
presentation of concepts and implementation strategies along with probabilities of success for various strategies.
Estate, business, and Tax planning documents are primarily the purview of legal counsel, since those documents are proscribed by law. Sample documents include living trusts, wills, powers of attorney, irrevocable trusts, business continuity agreements, buy/sell agreements, business entity documents, retirement plans, IRS required forms, etc.
This is collaborative at a couple of levels. During development of the plan, I consult colleagues with experience is different areas. It is also important that implementation of your plan involves YOU! Implementation involves choices as to both order and degree of implementation, sometimes stretching over several months to complete the initial phase.
“Deliverables”-designed through mutual agreement between us. A common approach in my practice is to focus on a specific area during regular review while providing high level feedback on other areas of planning. For example, one quarterly meeting might focus on the investment proposal, the next quarter would explore estate and business plans, third quarter on risk management (insurance and other), and fourth quarter income and tax strategies.
CIRStatements provides access to all investment accounts we handle for our clients in a single site. Many clients like the opportunity to access information on their account on-demand through this application.
As a result of a recent client survey, we have re-focused efforts to deliver timely analysis of information reported through various custodians and product vendors as well as
explanations of trades placed discretionary client accounts. We don’t want clients to be confused or feel that hey may be missing important information regarding activity in their accounts. We document each telephone conversation, email, and summarize face-to-face meetings in writing.
