What is Comprehensive Financial Planning?
The financial planning process has the same beginning for every client whether an individual or a business because proper financial planning requires the financial advisor to conduct an in-depth discovery interview prior to offering a recommendation.
A one size fits all approach to financial and retirement planning can create gaps and problems in the plan. What applies to one client usually won’t apply to the next. At Edward Kennedy Mason, our experience tells us that, just as everyone has a unique fingerprint, each person has a unique financial fingerprint. This means that every financial plan should be specific to that person.
Why Do I Need a Comprehensive Financial Plan?
Each client’s resulting financial and retirement plan should be unique to that person. It should be based upon the information gathered during the review and interview process and be a synthesis of that and the financial advisor’s knowledge and experience leading to a set of recommendations. In all cases, the aim should be to work toward reaching the client’s goals while respecting their values.
Some financial planners offer all their clients non-specific boilerplate plans focused on the latest products and sexy trends. The clients may focus on investor greed and willingness to buy into high historical returns and have their planners chasing hot financial sectors and buying products that are too good to be true. Sometimes financial planners may not be honest with the client, and sometimes they’re not being honest with themselves. In either case, it is the client who faces the potential loss when planners are not realistic and fail to properly advise. As a rule of thumb, greed creates unrealistic expectations and can cause financial disaster.
What is Included in the Financial Planning Process?
- Establishing and defining the basis of the Client and Planner relationship with an upfront interview to understand the prospective client. The beautiful part of this process is that both parties typically ask a lot of questions to determine if there is a fit.
- Gathering quantitative and qualitative information. Quantitative information generally focuses on numbers, and the financial planner should gather all the necessary documents before offering advice. Qualitative information focuses on the quality of life you currently have and wish to achieve down the road.
- Analyzing and evaluating your financial fingerprint. The financial planner should evaluate your information with an objective approach aimed at meeting your quantitative and qualitative goals.
- Developing and presenting a customized financial plan based upon your unique situation. The planner’s recommendations should reflect what needs to be done to achieve your goals as well as addressing problem areas.
- Executing or implementing the customized financial plan. You and the planner should agree on how the recommendations will be carried out.
- Reviewing the customized plan regularly. The financial planner and client should review the plan and its performance on a regular basis, at least quarterly, to make sure it is working.
Put simply, the Financial Planning Process starts with building a foundation based on your unique financial fingerprint. The financial planner then makes recommendations based upon that foundation, formulates a plan during consultations with you and then implements the resulting plan, always keeping in mind that there will be frequent reviews to ensure that the plan is performing as expected.
How to Avoid Mistakes in Financial Planning?
In the financial and retirement planning process, the major rules of thumb are to avoid chasing hot investment sectors and be watchful of greed. Be realistic and disciplined with your investment plan and review it regularly. Most importantly, find a financial planner you can trust. Start by looking for a Certified Financial Planner (CFP®) and thoroughly vet that planner before he or she takes you through the financial planning process. This approach can save you from disaster in the long run. Remember, it is your money, your plan and your future.