What is comprehensive financial planning?
A comprehensive financial planning approach considers all aspects of your financial situation in the formation of your personal strategy. If you do not consider all facets of the plan, one area might be adversely affected by isolated decision making – leaving you with an undesired result. For example, when reviewing your asset allocation strategy, you must consider the income tax consequences of changes made in the investment accounts.
What should I expect from a financial planning relationship?
After identifying your financial goals, your advisor will work with you to create a customized financial strategy. This strategy will address all of the unique aspects of your financial situation. A quality advisor will assist you with the implementation of the strategy. Additionally, your advisor should have a structured, on-going client communication protocol to assure that your plan is periodically reviewed, as adjustments must be made as your financial situation changes.
Why is a fee-only structure important?
Two words: independence and objectivity. Advisors that are dependent upon product sales and commissions for compensation have a greater likelihood of conflicts of interest. Working with a fee-only financial planner gives clients peace of mind, as the advice is always in the best interest of the client. The advisor does not stand to gain financially from their recommendations. As fee-only planners receive no monetary gain from the implementation of their recommendations, they can advise clients independently and objectively. Independent fee-only advisors are not tied to proprietary financial products, which allows them to guide clients to the most appropriate solution.
What questions should I ask when interviewing a financial advisor?
- Educational background
- Financial planning certifications and designations
- How long they have been in the business, and with what firms
- Availability of client referrals
- Their standing with regulatory bodies, and any disciplinary actions
- Which advisor will provide the actual client consulting
- How the advisor/firm is compensated
- Whether or not they sell financial products or receive “12b-1” fees or “trailers” on investments
- Whether or not they provide a written analysis of the financial situation with recommendations
- Whether or not they assist in the implementation of the plan
- How the relationship/communication is maintained after the initial planning meeting
What must a client expect to contribute to the relationship?
We expect clients to make a significant contribution to the financial planning process. Clients should be willing to provide all of the background information required for the advisor to prepare thorough recommendations. Client should also have an open mind with regard to financial concepts, such as savings and debt. Be ready to discuss new financial philosophies. Clients should be open and honest about their personal values, goals, concerns and preferences. Remember, an advisor can only assist a client after understanding the complete picture.
How is the financial strategy implemented if PFM is fee-only and does not sell products?
We provide specific recommendations for the implementation of the financial plan, and consider ourselves your personal financial manager. We encourage you to use your current service providers, including insurance agents, tax preparers and accountants, to implement your plan, as long as they are able to work as part of the team. Additionally, we can independently direct you to other professional providers who we know and trust such as mortgage professionals, estate planning attorneys, tax professionals, etc. We will coordinate the efforts of your financial team for the successful implementation of the plan.
Do I pay for the first interview?
At PFM, we provide a complimentary initial meeting to discuss your financial planning needs. During this interview we will listen to your concerns, assess our ability to help you, and explain how the services should be structured.
Can I do this on my own?
Do you need professional help in order to design and stick to an effective financial plan? This depends on your unique personal situation and dedication to learning and following key issues. Most individuals find that they make better business and personal financial decisions when they tap into the expertise, experience and discipline provided by a financial advisor. Making quality financial decisions requires a high level of commitment to learning and research. Whether you are concerned with an asset allocation strategy, planning for retirement, paying for college expenses or other financial goals, we believe that you are better served by leveraging the experience and expertise of professionals who have dedicated their careers to serving these needs.