March 8th, 2009 by Hank Brock

The financial planning process involves five basic steps. After the initial meeting with your financial planner, the five steps to the financial planning process include: data gathering, plan preparation, plan presentation, plan implementation, and on-going monitoring.

1. Financial Planning Process: Data gathering.

Data gathering is a marathon. It usually takes place at your home. It may take two hours or all day. Your planner will need to examine all your documents: Tax returns. Balance sheets. Income statements. Employee benefit plan booklets. Retirement plan documents. Wills. Trusts. Insurance policies. Investment statements. Brokerage house statements. Bank statements. These are the tangible bits of information.

These physical documents are not all that your planner will need to get from this data gathering session. There is also subjective information that the planner must determine. What are your lifestyle goals? Where do you hope to be in the future? When do you plan to retire, and what are your expectations for that time period? Assumptions of the future must also be established. Your attitudes regarding interest rates, inflation, the economy, and various other factors must be clearly established.

Finally, your financial planner will determine your personal attitudes – toward taxes, risk tolerance, complexity/simplicity of your financial affairs. The primary objective of the data gather is to have a clear idea of where you are currently and where you want to head for the future.

2. Financial Planning Process: Plan preparation.

Preparing your plan typically takes three to four weeks, as the planner does an analysis — the diagnostic work. The planner knows where you are, and where you want to be. Now they need to figure out the most efficient way to get you there.

For example, maybe it’s a family partnership. Or a family corporation. Or a family trust. They’ll look at all the pros and cons — then prepare written recommendations. Some will be major strategic recommendations. Others will be minor tactical recommendations. They will all fit together.

3. Financial Planning Process: Plan presentation.

Once your plan is prepared, your planner will schedule time to present their findings to you. During this first meeting, he’ll present the plan to you and review any major points. You’ll then take the plan home to read and study. It is important that you sit down with your spouse (if applicable) and fully examine the plan. Write down any questions that you have regarding it.

When you get back together with your planner, you’ll go over the plan in detail. They’ll answer your questions. Clarify details. As you agree on each recommendation, your planner will prioritize them into an “Implementation Check List.” It’s simply a “To Do” list for you and your planner.

4. Financial Planning Process: Plan implementation.

The first three steps will likely be completed in about a month’s time.

The fourth step, plan implementation, takes on average five to six months (sometimes longer). During this time, you will cover topics such as tax planning, retirement planning, estate planning, and other insurance concerns. Your financial planner may want to bring in other experts at this time to consult on specific issues.

When all is said and done, you may have as many as 30 different recommendations in your plan. Some will be major, broad, strategic recommendations, likely worth thousands of dollars to you. The rest will be to help you fine-tune your financial affairs. These things will help you cross the T’s, dot the I’s, and ensure your finances are really in order.

5. Financial Planning Process: On-going monitoring and maintenance.

In the final step of the financial planning process, your planner should be retained to help provide periodic updates and on-going advice. You should do a couple of tax planning meetings each year, review your portfolio, update insurance, etc… You’ll often find little questions that you’ll want to run past your advisor. Because your planner knows your unique situation, you will be alerted to changes in conditions that directly affect your plan.

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February 27th, 2009 by Damian Papworth

First, is the advisor experienced? When meeting with the advisor for the first time, you will want to ask how long they have been in business, the types of clients they typically handle, and the breadth of experience they possess. Although your issues may not seem overly complex, you may not be fully aware of all the strategies available to employ. Challenges facing seniors can be especially tricky, make sure you are not the advisor’s guinea pig. Many novices present public seminars with only have a very basic knowledge of tax and estate planning issues.

Second, as mentioned earlier, what is your advisor’s educational background? Look for bonafide credentials such as ChFC, CFP, CPA, CLU, JD, or other legitimate credentials. These signify background in investments, taxation, estate planning, finance, business, insurance, law, economics, etc. and require comprehensive examinations from accredited educational institutions, years of experience, and advanced continuing education requirements. Beware of those that solely have one of the many “quickie” designations proliferating these days.

Third, is the planner committed to high ethical standards? The advisor should hold membership in at least one industry association (Society of FSP, NAIFA, etc.). Most of these associations require adherence to a code of ethics. Of higher concern are planners that use their affiliations to bypass the establishment of trust.

Fourth, is there a commitment to continuing education? Complex laws are ever-changing and the economy never holds still. How many hours are spent each year keeping skills sharp? Are the continuing education hours at a beginning, intermediate, or advanced level?

Fifth, what kind of planning do you need? Will you need a comprehensive retirement plan, tax planning, and estate planning? Or do you just need help in one particular area? Find out if they are a glorified insurance salesman, or a bonafide financial planner.

Sixth, is your advisor a solo-practitioner? Or is your advisor part of a team that he can turn to for strategizing on complex issues? Or to bring an additional perspective? Is his firm large enough to provide the extensive resources as a large firm of pros?

Seventh, what is the advisor’s average client like? Do you fall into the range of his typical client, and if not, will you receive the attention that you need? Would someone else at the firm give you better attention? What is the general demographic that the advisor primarily works with (seniors, pre-retirees, young couples, etc.)? You want to make sure that your unique needs will be met.

Eighth, how is the planner compensated? Are they paid by commission, fee only, or a combination of the two?

Finally, is your planner a professional? Be careful of planners that are running their operation out of the back of their car, lack memberships or designations, only work part-time, or mock those that commit to high standards. These advisors are often smooth talkers that will downplay the importance of the attributes that they lack. These individuals may be charming and present

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