What Does Comprehensive Financial Planning Mean to You?

William J. Nedza, CFP

William J. Nedza, CFP™

The term “Financial Planning” means different things to different people, and just as no two people are exactly alike, no two financial situations are exactly alike.

Many factors go into each client’s situation: age(s), marital status, occupation, children (or not), income/expenses, health, risk tolerance, time frames, family situation, investment experience — and more. And just as important as those factors is each person’s unique personality. The “Know Your Customer” rule in the financial industry relates more to the factors that are specific and knowable by completing a financial profile. To truly know your client, however, takes dedicated time, effort and establishing a trusting relationship. Comprehensive Financial Planning, to our firm, means the ongoing process by which an adviser assists clients in making decisions about their entire financial situation in an effort to help them reach their goals and objectives.

THE FINANCIAL PLANNING PROCESS

There are six steps in the financial planning process, and each one is critical to the success of a client’s goals and objectives. While these steps may seem “simple”, generally we find that the entire process can take 3—5 meetings, and, depending on the complexity of a client’s situation, may take 20–40 hours of an adviser’s time outside of meetings. Comprehensive means comprehensive!

1. Establishing and defining the client-planner relationship
2. Gathering client data including goals
3. Analyzing and evaluating the client’s current financial status
4. Developing and presenting recommendations and/or alternatives
5. Implementing the recommendations
6. Monitoring the recommendations

Looking at each of these steps separately:

1. From the first time a client and an adviser speak or meet with each other, the foundation of the relationship is built, and this is perhaps the most important step in the whole process. As we expect clients to work with us “for life”, the better we know them and they know us, the better the long-term relationship is. The mutual expectations each of us have is critical.
2. Gathering not only all the facts (and yes, I’ve had garbage bags full of financial statements and documents accompany clients) but also a client’s feelings is similar to a bricklayer laying one brick at a time until the walls of a house are in place. We’re so grateful times have changed and clients can email us documents to review!
3. The actual inputting of data, analyzing of data, running scenarios and analyses takes a lot of experience, knowledge and expertise. Garbage in, garbage out is true, and only an adviser very experienced in financial plan development with the appropriate financial planning software programs will be able to provide clients a sound, accurate, professional financial plan.
4. Recommendations and advice are both art and science, as while two clients may have very similar situations and goals, knowing our clients’ personalities is critical in the advice and recommendations we make. Bottom line is the advice needs to always be in the best interest of the client.
5. Clients are responsible for implementing the recommendations, but an adviser may be able to help facilitate implementation, depending on what the advice is. For instance, our firm may make a recommendation to have estate planning documents prepared. This requires the expertise of a qualified estate planning attorney, however, but we may provide clients referrals to attorneys. Assisting clients with implementation of recommendations is an important step.
6. Monitoring client situations is critical, as changes constantly occur, and an adviser needs to always ensure a client is in the best situation they can be at all times. Career changes, family changes, home purchases, stock/bond market changes, employee benefit changes and a myriad of other things that effect a client needs to be taken into account.

The areas of financial planning include those below. Again, these areas may seem “simple”, but as you consider the intricacies of each area you’ll come to realize that each area can be quite complex, and oftentimes separate analyses of each area are prepared. For instance, imagine the work that goes into retirement income projections based on different ages, different rates of investment returns, receiving Social Security at different ages, and different expense estimates.

1. Financial statement preparation and analysis (including cash flow analysis and budgeting)
2. Insurance planning and risk management
3. Employee benefits planning
4. Investment planning
5. Income tax planning
6. Retirement planning
7. Estate planning

Suffice to say that each area is very important to the financial success of a client, and addressing all areas is not only smart but, our firm believes, the only way to provide clients with the best advice and service when working in a financial planning relationship. Having retirement investments that perform well but ignoring the fact that the investments do not name a beneficiary is not in the client’s best interest. Similarly, allowing a client to name a minor as a beneficiary with no discussion as to whom the minor’s guardian would be is also not serving the client well. Most areas in your financial situation will have a bearing on the other areas, and this interconnectedness is what makes comprehensive financial planning so important. Just as a house foundation will be inadequate if the bricklayer doesn’t lay a brick where one is needed, or lays it incorrectly, so will a client’s financial planning be inadequate if they omit part of the areas that make up their financial planning situation. Comprehensive means comprehensive!

Lastly, just who is or can be a “Financial Planner”, and who can prepare financial plans and give advice and recommendations? Well, just as someone given an honorary doctorate can call themselves a doctor, and you wouldn’t want them to treat your illness, you can find “advisers” who will purport that they offer financial planning services, and you may or may not want them to provide you their “treatment." As with many titles in the financial industry, financial planner has been mixed in with broker, adviser, counsel, consultant, etc. While I’m sure there are people in the industry who might be able to give advice in many areas, personally my advice, if you are looking to establish a relationship with an adviser who has the training, education and experience to perform Comprehensive Financial Planning services, you will be best served working with an experienced, independent, Certified Financial Planner^TM. I would encourage anyone seeking financial planning and advice to search for an adviser who can provide them with exactly what they need in terms of experience, knowledge, qualifications, education and services.

About the Author:

William J. (Bill) Nedza is a Certified Financial Planner^TM with Nedza Financial Advisors, LLC, an independent Registered Investment Adviser firm, with over 25 years of experience. At a very early age he was taught by his father that “you always do what’s best for the client” and to this day that tenet is the foundation for the advice and recommendations made to his clients. Bill believes that comprehensive financial planning is critical to understanding his clients’ financial situations, their goals and objectives, and then providing advice tailored to their unique needs. When he’s not helping clients plan for financial independence, he enjoys time with family and friends, music, theater, traveling, or out cycling on one of his six (!) bikes. He can be reached thru www.wjnedza.com, or via email at Bill@wjnedza.com.