Comprehensive Financial Planning
A lot of people, when shopping for an investing advisor, throw around the term “comprehensive financial planning”. They say, “I don’t just need tax advice, I don’t just need investing advice, I need comprehensive financial planning.” What does that really mean? I’ll tell you what it means to us at my company.
Let’s say you’re going to the mall and you’re shopping for some new towels. Before you can accomplish that goal, you need to understand your destination. There are lots of stores in the mall, but most don’t sell towels. So maybe you decide on J.C. Penney as your towel purchasing destination. Next you need to figure out where in the mall you are, and then figure out how to get to J.C. Penney from where you are.
Let’s apply that to financial advising. What’s the destination in comprehensive financial planning? It’s figuring out where you’re going financially. Specifically, what’s your target retirement lifestyle? Is that a lot like the lifestyle you are living now? How much does that lifestyle cost – $5,000 per month? Less? More?
Next we look at where each client is financially – what’s the current portfolio like? How likely is that portfolio to get you to where you want to go – is it designed for long-term success? A lot of people have no comprehensive plan for using their investment money – here’s an example. I had one client who thought she was struggling financially, but when we added up her assets – spread across 17 different accounts – we found she had $700,000 in usable investment capital. She knew where she wanted to go financially, but until that moment, she hadn’t known where she was.
There are a lot of pieces in a comprehensive financial plan. Risk analysis is an important component. We use standard deviations to measure the volatility in different asset classes to get a sense of the risk involved in each. If we know that a client only needs a four percent inflation adjusted return in order to get to the financial outcome he needs, why would we set up a portfolio that takes on unnecessary risk to chase a 12% return? On the other hand, if a client needs 7% to get where they need to go, we may pick some entirely different asset classes that, over the long term, will get that kind of return.
Are you looking for comprehensive financial planning? You’ve found it. Call me today.
