Financial Planning is a transition from Asset Accumulation to Income Generation to Wealth Transfer.  Because the Financial Planning profession is still developing, there are huge differences in the services of those holding themselves out to be “Financial Planners”.

One of the main differences among those who call themselves “Financial Planners” is how they are regulated. While planners that are securities registered as investment advisers are regulated as fiduciaries, the vast majority are not.  An investment advisor representative is someone who is required by law to act in your best interest, to disclose conflicts of interest, and who has demonstrated competence as evidenced by continuing-education, experience, and credentials.

Scope of Wealth Management Industry Professionals

Even though planners may be duly licensed and credentialed, they are not required by statute to be held to a fiduciary standard to act in the best interest of the client and provide full disclosure unless they are also registered as investment advisers.

SELECTING A FINANCIAL PLANNER

Credentials

Credentials are also important in selecting a financial planner. Many financial planners attract clients because of their ability to analyze client’s issues and produce an initial financial plan. The quality of the plans varies widely.  Some are boiler plate plans giving the same general recommendations to different clients with similar assets, and some are very well researched and presented.

Long Term Commitment

Financial planning is a process, not an event. Since the initial written financial plan is a static document, it quickly becomes interesting only from a historical perspective. It has been my experience that most planners who produce financial plans send only investment reports thereafter. What the clients can end up with is fee-based money management that is expensive with no ongoing planning.

This can potentially set clients up for another solicitation from another planner willing to use the creation of a new financial plan as a loss leader and solicitation for yet another money manager. Many clients want ongoing advice, not just a quarterly investment report.

Your goals and circumstances change over time.  Your assets are adjusted, hard assets are depreciated, and your income tax and estate situation is always dynamic. Financial planning is more than a few pages of recommendations that ends with the implementation of products and services.

CAPABLE OF HANDLING YOUR COMPLETE FINANCIAL PORTFOLIO

Every financial transaction has an effect and must be recorded and analyzed so the planner can advise clients as their world changes. For example, having the tools to analyze the effects of selling real estate on a client’s cash flow, income taxes, financial statement and estate plan is critical, and is the service most often missing in a “Financial Planning” engagement.

Planners must have all of the systems in place to allow them to answer your questions aided by financial planning reports; where they are able to make appropriate recommendations.

Being able to make recommendations backed up with sound analysis in the areas of Retirement, Cash Flow, Tax-Advantaged Planning, Investment and Estate allows a planner to:

• Create a formal Financial Plan
• Proactively contact clients when changes occur affecting their taxes or their investment portfolio
• Clearly show clients the overall results and expenses of their investment portfolio
• More fully incorporate a client’s goals and objectives into their financial plan
• Identify when to bring in appropriate professionals to help with important financial decisions
• Provide a coordinated and integrated process for investment decision making
• Coordinate and organize all financial documents

OBLIGATED TO ACT AS A FIDUCIARY

When looking for advice, look for a financial planner who is also securities registered and regulated to act as a fiduciary (in your best interest) and required by law to disclose their conflicts of interest and has demonstrated competence as evidenced by continuing education, experience, and credentials.

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