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FINANCIAL PLANNING MYTHS Myths Commonly Associated with Financial Planning, the Profession & Its Practitioners Presented B...
TODAY’S AGENDA <ul><li>Define  Financial Planning, The Financial Planning Process   </li></ul><ul><li>Myths Associated Wit...
FINANCIAL PLANNING DEFINED <ul><li>“ Financial Planning is the process of examining a client's personal situation, financi...
FINANCIAL PLANNING DEFINED “ Financial Planning is planning for and managing life’s financial outcomes”
FINANCIAL PLANNING DEFINED <ul><li>Retirement – “Lifestyles” </li></ul><ul><li>Family Related Expenses </li></ul><ul><ul><...
FINANCIAL PLANNING DEFINED How Do You Define Financial Planning?
FINANCIAL PLANNING DEFINED Financial Planning  is planning for,  “executing”  and managing life’s financial outcomes!
THE FINANCIAL PLANNING PROCESS A formal, six-step process, formulated by the College of Financial in 1972, designed to add...
THE FINANCIAL PLANNING PROCESS <ul><li>Step One:  Establish the Client/Planner Engagement;  You and Your Planner Should </...
THE FINANCIAL PLANNING PROCESS <ul><li>Step Two: Gather Data & Determine Goals; Your Planner Should </li></ul><ul><ul><li>...
FINANCIAL PLANNING PROCESS <ul><li>Step Three: Examine Current Financial Condition, Problems & Opportunities;  </li></ul><...
FINANCIAL PLANNING PROCESS <ul><li>Step Four: Develop & Present Financial Plan;  Your Planner Should </li></ul><ul><ul><li...
FINANCIAL PLANNING PROCESS <ul><li>Step Five: Implement Your Plan; Your Planner Should </li></ul><ul><ul><li>Assist the Cl...
FINANCIAL PLANNING PROCESS <ul><li>Step Six: Monitor the Financial Plan;  You  and your Planner Should </li></ul><ul><ul><...
FINANCIAL PLANNING PROCESS <ul><li>Hire Planner  and set expectations </li></ul><ul><li>Gather Data and establish personal...
FINANCIAL PLANNING MYTHS Myths Commonly Associated with Financial Planning Issues, the Profession & Its Practitioners
FINANCIAL PLANNER DEFINED “ Someone who  uses  the financial planning process to help  you  reach your life plan or  lifes...
FINANCIAL PLANNING MYTHS Myth #1 – “All Financial Planners are Certified Financial Planners.”
FINANCIAL PLANNING MYTHS <ul><li>Registered Financial Advisor </li></ul><ul><li>Registered Financial Planner </li></ul><ul...
FINANCIAL PLANNING ASSOCATIONS & SELF REGULATING ORGANIZATIONS* <ul><li>Certified Financial Planner Board of Standards, In...
CERTIFIED FINANCIAL PLANNER BOARD OF STANDARDS, INC. <ul><li>Established in July of 1985 by the College of Financial Plann...
Financial Planning Myths Myth #2 – “Financial Planners are primarily investment advisors.”
FINANCIAL PLANNING DISCIPLINES <ul><li>FINANCE – Asset & liability analysis, cash flow analysis and budgeting </li></ul><u...
FINANCIAL PLANNING MYTHS <ul><li>An Investment Advisor </li></ul><ul><ul><li>“ Any person who, for compensation, engages i...
REGISTERED INVESTMENT ADVISOR <ul><li>Federal or state registration required </li></ul><ul><li>Activities are supervised b...
FINANCIAL PLANNING MYTHS Myth #3 – “Financial Planners are the same as stockbrokers or other financial salespeople.”
FINANCIAL PLANNING MYTHS <ul><li>FINANCIAL SERVICE COMPANIES  </li></ul><ul><ul><li>Manufacture & Distribute Financial Pro...
FINANCIAL PLANNING MYTHS Myth #4 – “Financial Planners only serve the affluent.”
FINANCIAL PLANNERS <ul><li>Financial Services Company Affiliation </li></ul><ul><ul><li>Banks, Broker/Dealers, Insurance, ...
FINANCIAL PLANNING MYTHS Myth #5 – “Financial Planners only do big plans.”
Financial Planning Process <ul><li>Focused or “Segmented” Planning </li></ul><ul><ul><li>Finance oriented (Put financial h...
FINANCIAL PLANNING MYTHS Myth #6 – “Legitimate Financial Planners only charge fees.”
FINANCIAL PLANNING ASSOCIATIONS <ul><li>Professional Fee Only – 22%* </li></ul><ul><li>Professional Fee-Based Compensation...
FINANCIAL PLANNING IS <ul><li>ADVICE CENTERED </li></ul><ul><li>PROCEDURIALLY ORIENTED </li></ul><ul><li>A CONTINUOUS PROC...
FINANCIAL PLANNING MYTHS Myth #7 – “Financial Planners aren’t worth the expense.”
Financial Planners “ You should have an expectation of getting what you are willing to pay for.”  “ Define the expectation...
FINANCIAL PLANNING MYTHS Myth #8 – “Most people don’t need a Financial Planner.”
U.S. Savings Rate Remains Low
U.S. Consumer Debt
Personal Net Worth Median net worth through October 2002 was only $80,700 Median net worth for  55-64 age group is  only $...
RETIREMENT CONFIDENCE   “ A Nation of Optimists” <ul><li>Only 24% of Americans fear outliving their savings* </li></ul><ul...
Longevity Increasing <ul><li>Someone age 65 today had a life expectancy of age 64 at birth </li></ul><ul><li>Someone age 6...
WHAT FINANCIAL PLANNING CAN DO FOR YOU <ul><li>Organize your finances </li></ul><ul><li>Improve cash flow </li></ul><ul><l...
WHAT FINANCIAL PLANNING CAN DO FOR YOU? <ul><li>Put You In Control of Your Financial Situation </li></ul><ul><li>Provide C...
BEGIN WITH THE END IN MIND
THANK YOU FOR YOUR ATTENTION! CFG Wealth Management Services, Inc. 888-234-9674 / mpuckett@cfgwms.com
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Financial Planning Myths - Michael D Puckett, CFP

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  • Good Morning! Last November I was invited to speak to you on the subject of Financial Planning, an industry which traces its beginnings back to the late 1960’s. Generally, when having the opportunity to speak on this subject I’ve addressed specific areas or disciplines of financial planning from the perspective the group I’m addressing. This morning I’m going to take a different direction. Within the general public and the industry itself there are a variety of perceptions and opinions about financial planning, the profession and its practitioners. In many respects this industry itself has contributed to this situation. Standing here today I have little doubt there is a mixed bag of opinions within the audience, which were formed by personal experiences or what one has seen, heard or read from trade publications, financial service companies or our friends in the press. This afternoon I’m going to enlighten you from my perspective. It’s an opportunity I rarely have. My hope is to empower you with information that will position you to make an informed decision about financial planning, the industry and those who practice in it. Now I don’t know what brings you here this afternoon. We are approaching the end of a long day of meetings and I don’t believe you are required to be here. So I’m going to assume you have a genuine interest in this topic. You may be at a point in your life when you believe some action on your part is necessary to achieve your life plan or lifestyle objectives. If you leave this session compelled to take action upon your return home then our time together would have been a good investment for each of us.
  • So as to put everyone on the same page we will briefly examine the definition of financial planning and I will take you through the financial planning process. I’m going to share with observations and experiences in dealing with some of the myths associated with financial planning, the profession and it practitioners. I’m going to include some personal biases which have been formed over my 23 years working in this industry. They are indeed biases. However, I assure you they are based on factual circumstances existing in this industry today. I’ll close with some comments on what financial planning can do for you. A copy of this presentation and my comments is available upon your request. I’ll be happy to take any question you might during the session or immediately following.
  • This is the definition of financial planning provided by the College of Financial Planning. It is only one sentence! Financial Planning is all of this and more as you will see.
  • This is my definition, in its most simplest terms. “Financial Planning is planning for and managing life’s financial outcomes.” You will observe the action verbs, is planning and is managing suggests this a two step process. You begin by charting a course and then manage the process along the way. Again, this is its simplest definition!
  • What do I mean by life’s financial outcomes? Most people associate financial planning with retirement planning. Depending on your age, it may be difficult to contemplate retirement. Consequently, we focus on identifying a lifestyle you seek or desire to maintain. But there are other financial outcomes to consider. There are housing considerations, costs associated with college and when you just when you think you can start living for yourself we have weddings, or other issues associated with our kids. Then there are the financial and lifestyle issues associated with with our parents or in-laws.
  • How you define financial planning is likely determined by your own experiences with someone who works in this industry, your perception formed from by the financial service company advertisements or what you see, hear or read in the press. When I changed the name of my company in January of 1995 from to Consolidated Financial Group to CFG Wealth Management Services I wanted to both define the nature of our work and to whom we offered our services. Our logo had been trademarked years earlier. In retrospect I should have also trademarked the term wealth management. Today, wealth management is commonly used by the financial services industry and its representatives to describe a variety of services, most of which I never considered when I made that change. By example, I now understand the relationship between wealth management and running, navigating a rushing stream, kiacking, and waterfalls, thans to our friends at Wachovia.
  • As I said my definition was in its simplest form. When one inserts the step “Execution” into the definition, which is a very necessary aspect of the financial planning process, the position and actions taken by many in the profession has contributed to the general public’s confusion and sometimes skepticism of financial planning. I will explore this more thoroughly shortly.
  • There is a process to follow when setting out to complete a comprehensive financial plan. It was formulated by the College of Financial Planning in 1972. Yes, there is a college of financial planning. Throughout the 1970s and early 1980s, the College for Financial Planning focused on a single, designation-based program, the CFP ® Certification Professional Education Program. Institutional accreditation for the degree-granting arm of the College—the College for Financial Planning, Inc.—was not pursued until the advent of the Master of Science degree program in 1988. In November 1994, the College for Financial Planning, Inc. was granted institutional accreditation by the Commission on Institutions of Higher Education of the North Central Association of Colleges and Schools. Let’s take a few moments to acquaint you with this six step process.
  • You can set out on your own to do this work, but chances are you will likely fail. Most working people do not have the time, resources or independence to approach this subject in a prudent and thoughtful manner. Consequently, once you commit to this project, at whatever level, comprehensive or focused planning, you will have to find a financial planner to work with you. Hiring a financial planner or any advisor should be based on a matter of trust. But I don’t believe that can happen initially. Trusted advisor relationships are developed over time, not over night. The advisor must demonstrate expertise in some fashion so as to establish credibility. From here, confidence can be won and in time, trust develops between the advisor and client. These are steps you and the advisor can take at the onset to start off in this direction.
  • This can be a difficult process. The information may not be readily available. Chances are you don’t have a current net worth statement or cash flow statement. Last year’s taxes may be on extension. Your insurance policies are probably in a lockbox along with your will and trust. Your planner can minimize the effort. Defining goals, particularly lifestyle goals, can be difficult as well. We generally start with developing an understanding of your lifestyle “today” , the costs associated with maintaining where you are now, and then focus on the enhancements, if any, you desire to make, now or in the future.
  • This is where the work really starts and your planner or firm earns you confidence and trust, if it is going to happen. From the planner’s perspective they should be looking for opportunities to improve your situation, relative to your goals and expectations. The planner, depending on the scope of the engagement should examine your situation across these four disciplines.
  • Generally, this is where we divert from the typical financial planning process. I learned a long time ago that it is important to have a bounce session with the client, an opportunity to confirm our understanding of your financial situation, share our observations and the opportunities to improve your probability of success, PRIOR TO preparing a final document and action plan. Following this meeting, everyone should be on the same page as to the course we are likely to take. It eliminates surprises for everyone. The action plan can be devised and responsibilities assigned.
  • Execution is critical. Without it, you have nothing more than a stack of paper to file away. The role the planner plays at this stage should have been defined at the onset. This is also where the relationship could change, if the implementation phase was not discussed or defined within your engagement agreement.
  • As was discussed earlier, financial planning, simply defined, is a two step process. The planning phase has been completed and executed. But we don’t put it on the shelf. Circumstances and attitudes change! Consequently you, on your own, or with the assistance of your financial planner should periodically review and make adjustments to your plan as necessary.
  • So, to recap we have these six steps to complete: Set the expectations at the onset. It eliminates surprises later. Gather information and confirm the objectives. Determine and discuss the problems and opportunities – Your bounce session! Set policy and assign responsibilities associated with the action plan. Implement as required, either on your own or with the assistance of your planner, acting in a fiduciary capacity! Monitor and Manage the outcome! Things change all around us, some we control, most we do not!
  • At this point we are going to move into the core of today’s presentation. In February I wrote an article on this subject, which was based on the position taken by the Financial Planning Association, the largest and best funded trade association in the industry, in a publication dealing with perceptions about financial planning and planners in the mind of the general public. In my opinion, their answers weren’t as thorough as they could or should be. I have expanded here on my earlier attempt to address some of their short comings as well as share a different perspective in addressing these myths. Some might think this is more information than you care to know while others will find this information quite helpful in making a thoroughly informed decision prior to moving forward. As I said some of my observations and comments might surprise you.
  • To be clear, a financial planner is defined as a person who “uses” the financial planning process to help you reach your life plan or lifestyle goals. As with financial planning, how your definition of the term financial planner will be based on your experiences or perceptions formed from what you hear, see or read! You will note I have underscored the words uses and you in the definition.
  • Myth #1 All financial planners are CFP’s. This is simply not the case and certification does not assure the consumer of the outcome of the engagement, although it does minimize the downside possibilities.
  • As you can see the marketplace is very crowded! You will find individuals possessing a variety of designations, each holding themselves out as a financial planner. As you might imagine, the qualification for these various designations, varies as well. RFA – National Association of Personal Financial Advisors, NAPFA, “Fee Only” Registered Financial Planner – Registered Financial Planner Institute, Five years of service in the financial services industry RFC – International Association of Registered Financial Consultants, Experienced based RIA – Securities and Exchange Commission, Not a “professional designation, but a requirement for all financial planners ChFC/CLU – The American College; Society of Financial Services Professionals Experienced based, specialized knowledge, certification required. PFS – American Institute of Certified Public Accountants
  • Here I’ve listed the leading trade associations and self-regulating organizations. There are a variety.
  • Without question, the CFP designation is the most recognized and respected by the general public of all those shown earlier. CFP’s have been tested as to their knowledge and ability to apply what they know across each financial planning discipline. Further, CFP’s are required to meet continuing education requirements to insure theyare maintaining a professinoal level of competency. The Certified Financial Planner Board of Standards governs the activities of CFP’s in this country. They took ownership of the marks in 1986 and like the AICPA, have set disciplinary rules and procedures for CFP’s. Additionally, the Board established a single comprehensive examination in 1991, which follows the standard established for CPA’s.
  • As was noted earlier Financial planners counsel clients in many aspects of their financial lives. Investments are a part of the whole. A financial planner may chose to develop a “specialty” in any one or two areas within the four broad disciplines covered in the financial planning process.
  • As noted here, a FP may specialize in: Finance issues Taxation Investment analysis and portfolio construction Insurance &amp; Asset Protection Estate and legacy planning Financial Planners cannot be “specialists” in every area. It is just not possible. Generalists yes!
  • Interestingly, the SEC requires those who practice financial planning or hold themselves out as financial planners to register as an investment advisor. There are no supposed to be NO exceptions. However, there are many that do not register or find ways around this.
  • Therefore a financial planner must be registered at the state or federal level, depending on the size of the organization and full nature of the organization. A financial planner is required to provide you within 48 hours of the engagement his Form ADV, Part 2 and or a brochure containing the required disclosure information found in Part 2.
  • I did not think there were any stockbrokers left! Can you think of a financial services company today that identifies their representatives as a stockbroker? This is certainly the situation with our brokerage community. Financial Consultant, Financial Advisor yes, stockbroker no! It would be fair to say that in the early years of the profession financial planning was used by many as a means to support a financial product recommendation. I would not agree with this statement today. Did you know it is not necessary to be licensed within the securities industry as a registered representative or in insurance industry as an agent to act in the capacity of a financial planner? To analyze, plan, execute, monitor and manage financial outcomes on behalf of individuals and families all that is required is that you be registered with the SEC. The financial services industry would have you believe otherwise. By example, there is no financial transaction that we cannot execute on behalf of our clients, including buying or selling stocks, bonds, mutual funds, annuities, or life insurance. The difference is we are not compensated for doing so!
  • The key for you is to understand what is the primary business activity of the planner or firm he/she represents at the onset. This should provide some insight as to the orientation of the planning advice you are likely to receive. If there is an affiliation with a financial services organization be it a bank, brokerage house, investment or insurance company chances are good there will be an emphasis on transactional solutions vs. procedural solutions within your action plan? See comments above. You can also look at the revenue mix of the firm. See Annual Report!
  • Not So! A financial planner, whether independent or affiliated with a financial services company, operates just as you do, for profit. The market they serve will be dictated by their core competency, resources, experience and personal and business financial goals.
  • More often the market the planner serves will be dictated by his business model. A financial planner may operate, affiliate in any of these three ways. If affiliated with a financial services company chances are the planner will work across a variety of economic levels, again determined by the mission of the employer or affiliated company. An independent FP is more likely to serve a smaller segment of the market. In our industry, independence is defined differently than the way you might define it. An independent financial planner (registered investment advisor) who is also affiliated with a FSC is free to recommend any financial product solution that is available through the FSC. Your universe of options and solutions will be determined not by the planner but the organization who either manufactures and or distributes the qualifying universe. A totally independent firm is likely to work with anyone who is willing pay their fee. I’m biased on this point!
  • Again, not so. You, the client dictate that from the onset remember! You get to define the scope of the relationship. Now it is fair to say, if the FP is affiliated with a FSC and you are seeking assistance with asset and liability analysis, cash flow analysis and income tax planning only it is going to be difficult for this FP to get compensated. A bank is a good example. They provide financial planning, if the planning pertains to cash management, investments and insurance. If you are large enough, you can work with their private banking division or trust department.
  • As noted here your FP can perform segmented planning services, depending on your needs. But they will have to be paid for the service, which depending on the “focus” of the FP, will include a fee or combination of fee and the prospect of some sales commission.
  • This is one area with I differ significantly with the FPA position. To them, a FP can charge in a variety of ways. It ultimately depends on full disclosure. But I also understand the political aspects associated with their answer. The FPA is the outgrowth of what was two leading trade associations, one having an academic, altruistic orientation, the other having close operation ties to the financial services industry. The FPA attempts to walk a very thin line by meeting the needs and serving the philosophies of both brands of financial planners.
  • FP’s are generally compensated in any one or more of these manners. Based on survey results on 22% operate on a fee only basis, so that puts my firm in pretty small company.
  • When it comes to compensation I think one has to remember FP is Advice centered, Procedurally oriented, and a Continuous process. Most importantly, your financial planner began in the role of an advisor, someone acting in a position of trust, on your behalf. Well, that role also fits the definition of a fiduciary. Too often, in my opinion, the advisor, takes off his fiduciary hat and puts his or her sales person hat on, when in fact their obligation to serve the clients best interests never changed. I’m quite certain the client’s expectation of the planner never changed. If there is compensation build into the financial transaction it simply means the client paid more for the product than he or she would have otherwise incurred if the product was acquired without the “load.” Has the best interests of the client been served? The universe of financial solutions available to the client should not defined by the selling agreements between the planner or his firm and the manufacturer of the product. Whose interests are being served? One could argue that paying a professional fee is the equivalent of paying a sales commission. I would disagree! This position assumes that a transactional solution is inevitable and in the best interests of the client. Personal experience tells me otherwise.
  • Some aren’t! But then this can be said of every industry and every profession, including this industry. It comes down to the values and service commitment of the planner.
  • As noted here you should have an expectation of getting what you pay for. There is no guarantee you will get it, but you can have the expectation anyway. The best way to insure that happens is to define the expectations at the onset of the engagement. I hate surprises and I assume each one of you do as well!
  • Well, lets examine the facts!
  • This chart illustrates the personal savings rate through the first quarter of 2004. It was prepared by the U.S. Bureau of Economic Analysis. Personal savings is defined as that percentage of your income that you keep! As you can seen the savings rate for Americans was slightly below 2% through this period. Not very impressive is it! Profit Sharing Council reported in 2003 that pre-tax deferrals averaged 5.2% of pay for lower-paid and 6.3% of pay for higher-paid employees in 2002.
  • This chart illustrates the level of consumer credit in the U.S. through last July. More than 19% of our household income tied to credit. US consumer debt has reached staggering levels after more than doubling over the past 10 years. According to the most recent figures from the Federal Reserve Board, consumer debt hit $1.98 trillion in October 2003, up from $1.5 trillion three years ago. This figure, representing credit card and car loan debt, but excluding mortgages, translates into approximately $18,700 per US household.
  • According to the Federal Reserve the median net worth for an American was only $80,700 through October 2002. The median net worth for the 55-64 age group was only $181,500 through the same period.
  • Yet remain a nation of Optimists! Only 24% of Americans fear outliving their savings. 32% of baby boomers don’t spend any time on retirement planning. Where is the money coming from?
  • Longevity is your life expectancy based on your current age. For example, let’s say you’re 65 years old. When you were born in 1938, your life expectancy was around 64 years. Yet today, at age 65, you’ve not only surpassed your original life expectancy, you can expect to live another 18 years, according to national health statistics. That takes you to age 83. But as with life expectancy, you have 50–50 odds of living beyond your longevity expectancy. In fact, according to current longevity tables, if you reach age 83, your life expectancy extends to age 90. Moreover, the odds of a long life are even better for couples than individuals. Consider these startling figures provided by TIAA-CREF Institute and drawn from annuity tables developed by the Society of Actuaries. A man currently aged 60 has a two-in-ten chance of reaching age 95. A woman age 60 has a three-in-ten chance. But as a married couple, the odds are four in ten that one of them will reach age 95! And these are only the odds as of this moment. Further medical improvements may extend these averages by the time today’s 60- and 65-year olds reach their 80s and 90s. These life expectancy and longevity numbers are why many financial planners today routinely design retirement portfolios to last until age 95 or 100. The odds are very good that many of you saving for retirement, and those of you entering retirement, will live well into your 80s, and a significant percentage of you will live into your 90s. So I leave it to you. Do you think most people need a FP?
  • These are examples of what Financial Planning can do for you. If is possible to accomplish all of these things.
  • In the final analysis FP can provide these benefits: It can put you in control of your financial situation. It can provide clarity and purpose toward fulfilling lifestyle goals And finally it can provide financial peace of mind!
  • When you head home, please take this thought with you, Begin with the end in mind! If you have been reflecting on where you are today in terms of your life plan or lifestyle expectations and determine some work is in order define the outcome you seek, establish the parameters for taking action and get on with making your dreams a reality. Doing so, will insure you are taking the first step in the right direction.
  • On behalf of the staff of CFG and our professional associates I would like to thank you for your time. If you have any questions I would be happy to address them now.
  • Transcript of "Financial Planning Myths - Michael D Puckett, CFP"

    1. 1. FINANCIAL PLANNING MYTHS Myths Commonly Associated with Financial Planning, the Profession & Its Practitioners Presented By Michael D Puckett, CFP CFG Wealth Management Services, Inc.
    2. 2. TODAY’S AGENDA <ul><li>Define Financial Planning, The Financial Planning Process </li></ul><ul><li>Myths Associated With Financial Planning, The Profession & Its Practitioners </li></ul><ul><li>What Financial Planning Can Do For You </li></ul>
    3. 3. FINANCIAL PLANNING DEFINED <ul><li>“ Financial Planning is the process of examining a client's personal situation, financial resources, financial objectives and financial problems in a comprehensive manner, developing an impartial, integrated plan to utilize the resources to meet objectives and solve problems, taking the steps to implement that plan once approved by the client, and monitoring the plan performance to take corrective action as necessary to assure that results match the plan projections.&quot; - College of Financial Planning </li></ul>
    4. 4. FINANCIAL PLANNING DEFINED “ Financial Planning is planning for and managing life’s financial outcomes”
    5. 5. FINANCIAL PLANNING DEFINED <ul><li>Retirement – “Lifestyles” </li></ul><ul><li>Family Related Expenses </li></ul><ul><ul><li>Housing, College, Weddings </li></ul></ul><ul><li>Asset Protection </li></ul><ul><ul><li>Personal Liability, Heath Care </li></ul></ul><ul><li>Elder Care </li></ul><ul><ul><li>Family </li></ul></ul><ul><ul><li>Personal </li></ul></ul>
    6. 6. FINANCIAL PLANNING DEFINED How Do You Define Financial Planning?
    7. 7. FINANCIAL PLANNING DEFINED Financial Planning is planning for, “executing” and managing life’s financial outcomes!
    8. 8. THE FINANCIAL PLANNING PROCESS A formal, six-step process, formulated by the College of Financial in 1972, designed to address, in whole or in part, life’s financial issues and opportunities.
    9. 9. THE FINANCIAL PLANNING PROCESS <ul><li>Step One: Establish the Client/Planner Engagement; You and Your Planner Should </li></ul><ul><ul><li>Discuss your objectives & expectations </li></ul></ul><ul><ul><li>Discuss the services available </li></ul></ul><ul><ul><li>Clarify responsibilities and time frame </li></ul></ul><ul><ul><li>Finalize the scope of the engagement </li></ul></ul><ul><ul><li>Determine the fee/compensation arrangement </li></ul></ul>
    10. 10. THE FINANCIAL PLANNING PROCESS <ul><li>Step Two: Gather Data & Determine Goals; Your Planner Should </li></ul><ul><ul><li>Obtain information & documents </li></ul></ul><ul><ul><li>Help you “refine” or crystallize goals </li></ul></ul><ul><ul><li>Develop an understanding of your values & attitudes </li></ul></ul>
    11. 11. FINANCIAL PLANNING PROCESS <ul><li>Step Three: Examine Current Financial Condition, Problems & Opportunities; </li></ul><ul><li>Your Planner Should </li></ul><ul><ul><li>Analyze information </li></ul></ul><ul><ul><li>Identify problems & opportunities across each major financial planning discipline </li></ul></ul><ul><ul><ul><li>Finance – Asset & Liability Structure, Cash Flows </li></ul></ul></ul><ul><ul><ul><li>Investment Taxation – Ordinary and Income </li></ul></ul></ul><ul><ul><ul><li>Risk Management – Insurances & Asset Protection </li></ul></ul></ul><ul><ul><ul><li>Law – Estate, Charitable & Legacy Planning </li></ul></ul></ul>
    12. 12. FINANCIAL PLANNING PROCESS <ul><li>Step Four: Develop & Present Financial Plan; Your Planner Should </li></ul><ul><ul><li>Prepare & present a personalized financial plan </li></ul></ul><ul><ul><li>Establish a review cycle </li></ul></ul>
    13. 13. FINANCIAL PLANNING PROCESS <ul><li>Step Five: Implement Your Plan; Your Planner Should </li></ul><ul><ul><li>Assist the Client or manage the process as defined in the Engagement Agreement </li></ul></ul>
    14. 14. FINANCIAL PLANNING PROCESS <ul><li>Step Six: Monitor the Financial Plan; You and your Planner Should </li></ul><ul><ul><li>Review changes in personal circumstances </li></ul></ul><ul><ul><li>Review and evaluate impact of changing tax laws </li></ul></ul><ul><ul><li>Review and Discuss changing life circumstances </li></ul></ul><ul><ul><li>Make periodic adjustments or recommendations as necessary </li></ul></ul>
    15. 15. FINANCIAL PLANNING PROCESS <ul><li>Hire Planner and set expectations </li></ul><ul><li>Gather Data and establish personal goals </li></ul><ul><li>Determine and discuss problems and opportunities </li></ul><ul><li>Final document, set policy and action plan </li></ul><ul><li>Implement as required </li></ul><ul><li>Monitor and manage the outcome </li></ul>
    16. 16. FINANCIAL PLANNING MYTHS Myths Commonly Associated with Financial Planning Issues, the Profession & Its Practitioners
    17. 17. FINANCIAL PLANNER DEFINED “ Someone who uses the financial planning process to help you reach your life plan or lifestyle goals.” How Do You Define Financial Planner?
    18. 18. FINANCIAL PLANNING MYTHS Myth #1 – “All Financial Planners are Certified Financial Planners.”
    19. 19. FINANCIAL PLANNING MYTHS <ul><li>Registered Financial Advisor </li></ul><ul><li>Registered Financial Planner </li></ul><ul><li>Registered Financial Consultant </li></ul><ul><li>Registered Investment Advisor </li></ul><ul><li>Chartered Financial Consultant, Charter Life Underwriter </li></ul><ul><li>Personal Financial Specialist </li></ul>
    20. 20. FINANCIAL PLANNING ASSOCATIONS & SELF REGULATING ORGANIZATIONS* <ul><li>Certified Financial Planner Board of Standards, Inc. * CFP </li></ul><ul><li>Financial Planning Association </li></ul><ul><li>Society of Financial Services Professionals * ChFC </li></ul><ul><li>National Association of Personal Financial Advisors </li></ul><ul><li>American Institute of Certified Public Accountants * PFS </li></ul><ul><li>International Association of Registered Financial Consultants </li></ul><ul><li>Registered Financial Planner Institute </li></ul>
    21. 21. CERTIFIED FINANCIAL PLANNER BOARD OF STANDARDS, INC. <ul><li>Established in July of 1985 by the College of Financial Planning </li></ul><ul><li>Took Ownership of CFP marks in 1986 and established Disciplinary Rules & Procedures </li></ul><ul><li>CFP Board established a single comprehensive examination in 1991 </li></ul>
    22. 22. Financial Planning Myths Myth #2 – “Financial Planners are primarily investment advisors.”
    23. 23. FINANCIAL PLANNING DISCIPLINES <ul><li>FINANCE – Asset & liability analysis, cash flow analysis and budgeting </li></ul><ul><li>TAXATION – Ordinary and investment income tax planning </li></ul><ul><li>SECURITIES – Investment analysis and portfolio construction </li></ul><ul><li>RISK MANAGEMENT – Insurance & asset protection analysis and planning </li></ul><ul><li>LAW – Estate, charitable & legacy planning </li></ul>Financial Planners Should Be Competent Generalists
    24. 24. FINANCIAL PLANNING MYTHS <ul><li>An Investment Advisor </li></ul><ul><ul><li>“ Any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities, or who, for compensation and as part of a regular business, issues or promulgates analyses or reports concerning securities.” – Registered Investment Advisor Act, Section 202 - Definitions </li></ul></ul>
    25. 25. REGISTERED INVESTMENT ADVISOR <ul><li>Federal or state registration required </li></ul><ul><li>Activities are supervised by the Securities and Exchange Commission per the 1940 RIA Act </li></ul><ul><li>Form ADV, Part 1 & 2 updated annually </li></ul><ul><li>Periodic Audits </li></ul><ul><li>Full disclosure required </li></ul><ul><ul><li>Part 2, Form ADV and / or </li></ul></ul><ul><ul><li>Provide firm brochure disclosing Form ADV, Part 2 information </li></ul></ul>
    26. 26. FINANCIAL PLANNING MYTHS Myth #3 – “Financial Planners are the same as stockbrokers or other financial salespeople.”
    27. 27. FINANCIAL PLANNING MYTHS <ul><li>FINANCIAL SERVICE COMPANIES </li></ul><ul><ul><li>Manufacture & Distribute Financial Products </li></ul></ul><ul><ul><li>Business Purpose Almost Always Evolves Around a Financial Transaction Occurring </li></ul></ul><ul><ul><li>Planners Who Are Affiliated With A Financial Services Company May Be Compelled To Focus On A Transaction Solution vs. A Procedural Solution </li></ul></ul>
    28. 28. FINANCIAL PLANNING MYTHS Myth #4 – “Financial Planners only serve the affluent.”
    29. 29. FINANCIAL PLANNERS <ul><li>Financial Services Company Affiliation </li></ul><ul><ul><li>Banks, Broker/Dealers, Insurance, Investment Companies </li></ul></ul><ul><li>Independent – Industry Definition </li></ul><ul><ul><li>Broker/Dealer or Insurance Co. Link </li></ul></ul><ul><li>Totally Independent Firm </li></ul><ul><ul><li>General or Specialized Orientation </li></ul></ul>
    30. 30. FINANCIAL PLANNING MYTHS Myth #5 – “Financial Planners only do big plans.”
    31. 31. Financial Planning Process <ul><li>Focused or “Segmented” Planning </li></ul><ul><ul><li>Finance oriented (Put financial house in order, develop an operating budget) </li></ul></ul><ul><ul><li>Planned expense (College, wedding, etc.) </li></ul></ul><ul><ul><li>Portfolio Construction, Inv. Policy Statement </li></ul></ul><ul><ul><li>Risk Management & Asset Protection </li></ul></ul><ul><ul><li>Retirement Income Planning </li></ul></ul><ul><ul><li>Estate or Legacy Planning </li></ul></ul>
    32. 32. FINANCIAL PLANNING MYTHS Myth #6 – “Legitimate Financial Planners only charge fees.”
    33. 33. FINANCIAL PLANNING ASSOCIATIONS <ul><li>Professional Fee Only – 22%* </li></ul><ul><li>Professional Fee-Based Compensation </li></ul><ul><li>Professional Fee & Commission – 61% </li></ul><ul><li>Commission Only </li></ul>*College of Financial Planning – 2003 Survey of Trends in The Financial Planning Industry
    34. 34. FINANCIAL PLANNING IS <ul><li>ADVICE CENTERED </li></ul><ul><li>PROCEDURIALLY ORIENTED </li></ul><ul><li>A CONTINUOUS PROCESS </li></ul>
    35. 35. FINANCIAL PLANNING MYTHS Myth #7 – “Financial Planners aren’t worth the expense.”
    36. 36. Financial Planners “ You should have an expectation of getting what you are willing to pay for.” “ Define the expectations and parameters at the onset of the engagement.”
    37. 37. FINANCIAL PLANNING MYTHS Myth #8 – “Most people don’t need a Financial Planner.”
    38. 38. U.S. Savings Rate Remains Low
    39. 39. U.S. Consumer Debt
    40. 40. Personal Net Worth Median net worth through October 2002 was only $80,700 Median net worth for 55-64 age group is only $181,500
    41. 41. RETIREMENT CONFIDENCE “ A Nation of Optimists” <ul><li>Only 24% of Americans fear outliving their savings* </li></ul><ul><li>Forty-seven percent of workers NOT saving for retirement are somewhat confident of having enough money at retirement* </li></ul><ul><li>32% of baby boomers don’t spend any time on retirement planning** </li></ul><ul><li>Source: 14 th Annual Retirement Confidence Survey, Employee Benefit Research Institute, American Savings Education Council, Mathew Greenwald & Associates ** ING U.S. Financial Services </li></ul>
    42. 42. Longevity Increasing <ul><li>Someone age 65 today had a life expectancy of age 64 at birth </li></ul><ul><li>Someone age 65 today has a life expectancy of age 83 </li></ul><ul><li>Life expectancy increased 30 years between 1900 and 2000 </li></ul>
    43. 43. WHAT FINANCIAL PLANNING CAN DO FOR YOU <ul><li>Organize your finances </li></ul><ul><li>Improve cash flow </li></ul><ul><li>Lower personal income taxes </li></ul><ul><li>Plan for retirement </li></ul><ul><li>Plan for college expenses </li></ul><ul><li>Improve investment performance </li></ul><ul><li>Lower investment risk </li></ul><ul><li>Reduce insurance costs </li></ul><ul><li>Minimize estate settlement costs </li></ul>
    44. 44. WHAT FINANCIAL PLANNING CAN DO FOR YOU? <ul><li>Put You In Control of Your Financial Situation </li></ul><ul><li>Provide Clarity and Purpose Toward Fulfilling Lifestyle Goals </li></ul><ul><li>Provide Financial Peace of Mind </li></ul>
    45. 45. BEGIN WITH THE END IN MIND
    46. 46. THANK YOU FOR YOUR ATTENTION! CFG Wealth Management Services, Inc. 888-234-9674 / mpuckett@cfgwms.com
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