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Financial Planning

What is financial planning?

Financial Planning is the life long process of integrating personal values with the management of both human and financial capital for the betterment of self and community.
Questions You Might Have

There are a number of very good questions that many people who are thinking about using a financial advisor often want to ask but somehow feel funny about it. I know that these questions were on my mind when I started out. We also have posted on the left a few other articles that might help answer some more particular questions.

What is a personal financial plan?
What is "fee-only" and why is it so important?
How does financial planning make a difference?
Why use a financial advisor?
How are financial advisors compensated?
How should someone select a financial advisor?



What is a personal financial plan?
In the old days, a financial plan was a large, 3-ring binder notebook listing all the details about your finances and what you should do about each of those details. Most of those plans were circular-filed, sometimes on receipt. Today, having a personal financial plan means that you have a systematic and optimistic way to think about what has meaning to you, and how you will finance those desires. Two common goals are achieving long-term financial security and a having a chance to develop and use your personal gifts in a meaningful way. Hence, a "financial plan" addresses the nuts and bolts of cash flow planning, insurance considerations, income and estate tax optimization, and investment management in tandem with career considerations, intergenerational finances, and legacy concerns. Just as personal growth is never "finished", neither is a person's financial plan ever "finished".

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What is "fee-only" and why is it so important?
"Fee-only" used to be shorthand for being compensated by fees, not commission. It is now a term that describes someone who has minimized conflicts of interest and works only for the client. We've been fee-only from the start of our practice in 1992, when being fee-only was a very different way to be. To read more about the significance of the "fee-only" business model, click here

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How does financial planning make a difference?
Financial planning offers the promise of more financial safety, more financial understanding, more informed personal choices, more vibrant career choices, more meaningful family conversations, more knowledge about social and economic policy--and, oh yes, ---higher lifetime wealth. In sum, financial planning offers peace of mind and more effective progress towards your goals.

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Why use a financial advisor?
The role of the financial advisor has several aspects, including: coach, teacher, clerk, trusted sounding board, reporter, information resource, implementer, a person who can help connect you to other professionals and quarterback your advisory team, truth-teller, and cheerleader. Financial advisors are trained in the nitty-gritty details of tax, investments, and insurance. They combine this knowledge and their background experience with a detailed and empathic understanding of where you are coming from and where you want to go. The result is your having an informed, caring professional on your side, arming you with objective information and tailored advice at each financial turning point in your life. Implementing planning ideas becomes low-hassle, and personal goals become more readily achieved and celebrated. Life is also a whole lot easier when someone else is minding the store while you are out in the world pursuing your dreams. We've got your back.

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How are financial advisors compensated?
Fee-only advisors, such as our firm, are paid only by the client and only by fees which are fully disclosed and visible to the client. Clients deserve nothing less.

Some fee-only advisors charge an hourly rate. Others, like our firm, only work with clients on a continuous, retainer basis. We think the retainer fee model works best because we see our product as being in a relationship with you, and at the ready whenever a planning issue or opportunity arises.

There are other arrangements in our industry. For example, brokers, i.e. those regulated by FINRA, are paid by commissions, only some of which are easily visible to the client. Commission income represents compensation from the product company to the broker for selling the company's product. Commissions thus introduce questions of objectivity and loyalty. These days, some advisors are charging a combination of fees and commissions, which can further blur the client's view of the advisors total compensation.

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How should someone select a financial advisor?

  • Interview at least three advisors
    • Develop a list of advisors to consider from friends and other referral sources, e.g. NAPFA FPA. This is an important decision; spend more time on this decision than you do buying a refrigerator, for example.
     
  • Use these differentiating questions:
    • How are you regulated. Aim to work with someone who has a legal obligation to put your interests first.  
    • Do you just manage money or do you also provide comprehensive planning. (Money managers don't look at your whole picture.)  
    • Do you pay or receive referral fees? Look for a 'no' answer.  
    • Do you own a partial interest in another firm? Be wary if the answer is yes and referrals go to that firm.  
    • Does some other entity own all or a part of your business?. Be wary if yes. The owner can exert pressure to keep margins up aka having the advisor talk less with clients.
       
  • Get the ADV, the government mandated disclosure document. Part II comes from the advisor. Part I is posted here
     
  • Then do a gut check for competency and chemistry: Do you want to work with this person over the long-term on issues of great personal importance to you? 
     
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Life Transitions
Life Transitions
Growing up, getting married, having children, planning a child's wedding, planning your own retirement... we call these moments life transitions, and each has its own special financial needs.
Paula's Recommended Reading List
Paula's Recommended Reading List
Over the years, I have found a few websites and articles that I think are terrific resources, and I wanted to share some of them with you.
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