Comprehensive Financial Planning

A: The financial planning process helps identify what is realistic given your resources and often, equally important, what’s being overlooked. It helps you affirm that your goals are really your goals and helps balance the needs, wants, and wishes of today with those of the future.

A: Be certain to ask about their experience in any areas you are concentrating on (i.e., college planning, retiring, home purchase, inheritance, etc.). A planner is acting in YOUR best interest, not their own or the company they work for. So, do whatever possible to determine their reputation for both competence and fiduciary compliance.

A: You must disclose what you earn, what you owe and a monetary estimate of what you own. In conversations with your financial planner, he or she will also help you uncover such things as your history with money and your core values, as they help you set achievable goals to work towards.

A: A financial plan should include a review of your goals and objectives, along with your net worth, cash flow, investment portfolio, insurance, and taxes. These provide the foundation used to create projections and design a plan for implementing strategies to achieve your goals.

A: An important part of an effective plan is addressing the risks that may lie ahead. Insurance helps protect you and your loved ones against catastrophic events. Health insurance, life insurance, disability insurance, auto and home insurance should all be considered in a financial plan. A financial planner can analyze existing policies for their cost, effectiveness, and benefits to you and your family.

A: Stay actively involved. Executing your financial plan is a team approach. If you have someone managing your investments, they should execute according to your investment strategy. Communication and follow up with your planner on a continuing basis will help you adjust to the ups and downs in your plan to maintain the lifestyle you choose.

A: Asset allocation refers to the diversity of your entire savings and investment portfolio across asset classes. Stocks, bonds, cash, and real estate are examples of asset classes. Diversification refers to the types of investments held within each class. For example, both Raytheon and Honeywell are high-cap equities in the Industrials sector. Because they’re in the same sector, these two stocks are likely to move up or down together. However, Kraft Heinz is in the Consumer Staples sector. It is not likely to move in tandem with Raytheon or Honeywell. Owning Raytheon and Kraft Heinz provides diversification within the asset class of stocks. However, a portfolio that invests in multiple types of assets, not just stocks, is also important.

A: Time horizon refers to the amount of time you have to save for a particular event. For example, the time horizon for a college savings account might be 12 years for the parents of a six-year-old child and considerably shorter for a teen. In similar fashion, the time horizon for a 30-year-old saving for retirement might be 35 years, whereas it might be 15 years for a 60-year-old who doesn’t begin saving until much later in life.

A: Ask about their experience with people in situations like yours. Ask them about their education and certifications. Ask about the breadth and depth of products offered. Ask how they are compensated for their services. Finally, make certain the financial planner is fully licensed and in good standing.

A: A fiduciary is a person or organization that acts on behalf of another person or persons, putting their clients’ interests ahead of their own, with a duty to preserve good faith and trust. Being a fiduciary requires being bound both legally and ethically to act in the other’s best interests. A financial services industry professional has a fiduciary responsibility to his or her clients to put a client’s needs and interests ahead of his or her own. Accordingly, Financial Planners have a fiduciary responsibility to always act in the best interest of their clients.