Why Hire a Financial Planner?
For years, a relationship with a financial advisor has been concentrated on one thing – investments. If you have worked with an advisor within the past decade, you may be familiar with the traditional talks as to the health of the economy and what they foresee as an achievable return. Then, from that point, you probably receive quarterly statements and maybe even have a routine annual review.
Generally, this has been the standard for an advisor/client relationship; however, recent years have seen the emergence of “financial planning” at the forefront of many financial firms’ marketing outlets.
Your current advisor may call himself/herself a “financial planner” or you may have been approached by someone asking if your current advisor offers financial planning and, if not, suggesting you work with an advisor who does.
As firms across all facets of the industry continue to use the term, how do we actually determine who is practicing financial planning and who isn’t? Or, more importantly, how do we determine its value? More simply, what is financial planning?
What is Financial Planning?
In its simplest form, financial planning is an ongoing process of identifying short and long-term life goals and taking appropriate steps to meet those goals through sound financial decisions that encompass your entire financial picture.
How Do I Know If I Need Financial Planning Services?
Financial planning should be an ongoing process. It should begin with determining what you actually want to accomplish and then be revisited on a regular basis. After all, whose financial life doesn’t change over a 20, 10 or even 5- year time period? As your life changes, so should your planning. Each phase of life has unique demands that should address present and future needs.
Financial planning should be holistic, encompassing all of your life. A relationship with a planner should encompass things like tackling debt versus saving, identifying appropriate amounts of life insurance, evaluating your cash inflows and outflows and the tax character of various assets on your balance sheet. Ideally, these areas should all be tied together and prioritized in a way that helps you best accomplish what is most important to you. Financial planning is not just selecting the appropriate accounts to house certain types of investments or ensuring your investments are in line with your risk tolerance. These are very important pieces of the puzzle, but they are NOT the only elements of valuable financial planning.
It only seems fitting that financial planning includes financial decisions. Planning allows you to look into various outcomes of a decision and ensure confidence in moving forward. Engaging in planning may result in a laundry list of goals to accomplish, but how achievable are those goals? After all, what good are goals if they are immediately dubbed “unachievable?” Ongoing financial planning offers bite-sized, achievable goals that provide a clear path to the goal you are ultimately working to reach.
The Value of Financial Planning
As a consumer, the evaluation as to the effectiveness of planning should not be limited to the fact that you are simply receiving some variation of planning. As we have historically evaluated the tangible results of investment managers, we also must examine the merits of financial planning. But how?
After all, it isn’t as straight forward as looking to see how well you performed relative to your benchmark. Sure, we could evaluate the current and long-term tax savings associated with certain tax planning strategies, but this is generally only a small subset of the big picture characteristics of your entire financial life.
Do I have a clear understanding of my goals?
No matter how good or bad the financial situation, there is always a goal to achieve. Goals – and steps needed to reach those goals – should be clearly defined. It may be as simple as saving a certain amount each year, but reaching the final goal won’t be achieved if you aren’t aware of the steps to get you there.
Am I confident in my financial decisions?
We are constantly making financial decisions. Whether trying to decide how many vacations to take this year, which debt to pay off first or when to retire, viable financial planning should illustrate limits and opportunities for lavishness. You should be able to have peace of mind knowing that you are operating within the boundaries to ultimately lead to success.
How do I measure financial success during market volatility?
One of the more valuable takeaways from planning is the examination of success rates. A valuable ongoing planning relationship should provide reassurance that you are not relying on luck to achieve goals. Taking the time to evaluate your personal circumstances and how they holdup through numerous periods of market returns can not only prevent bad emotional decisions through volatile market conditions but can also provide the satisfaction of enjoying the fruits of your labor.
Published: May 25, 2016
Authored By: Chad McPherson
No forecast can be guaranteed. The views expressed are those of the Payne Wealth Partners Investment Committee and are subject to change at any time. These views are for informational purposes and should not be relied upon as a recommendation or solicitation or as investment advice.The information in this material is only as current as the date indicted, and may be superseded by subsequent market events or for other reasons. Statements concerning financial market trends are based on current market conditions, which are subject to change and which Payne Wealth Partners, Inc. does not undertake to update. While all information prepared in this document is believed to be accurate, any statements of opinion constitute only current opinions of Payne Wealth Partners, Inc., which are subject to change and which Payne Wealth Partners, Inc. does not undertake to update. Accordingly, you should not put undue reliance on these statements.