Five Part Series: The Power of Financial Planning

 

Make It Personal: Why Customized Advice Matters When Working With a Financial Pro

 

Here is the final installment of a five-part series on The Power of Financial Planning, we look at the all-important personalization aspect of financial planning — how a person who works with a financial professional should expect to receive individualized advice and services, and how to determine that’s what they’re getting.

 

When a person works with a fitness trainer, they expect a workout that’s tailored to their abilities, limitations and goals. When a person consults with an architect to design a new home, they expect the plans will reflect not only their vision for the home but also the personal financial parameters for building it.

 

Similar expectations should apply when a person works with a financial professional. As unique as every person’s financial situation and goals are, they deserve — and should expect — a financial professional to deliver services, strategies and recommendations that are customized to their specific circumstances and priorities. Everyone wants the means to live a comfortable, financially secure life and to achieve their goals. A whole host of variables must factor into the process of determining how best to get there, including a person’s age and stage of life, family circumstances, income, assets, health status, personal and professional aspirations and much more. Given how much these factors tend to vary from individual to individual, a well-thought-out, personalized approach to handling your finances is much likelier to lead to positive financial outcomes, both now and in the future, than a one-size-fits all approach.

 

“At the end of the day,” says FPA member and CERTIFIED FINANCIAL PLANNER™ (CFP®) professional Mike Giefer, JD, with the Johnston Group in Minneapolis, MN, “it comes down to me understanding each individual’s financial DNA — their personality type, what makes them tick as people and in terms of how they handle their money.”

How do you know the professional financial guidance and services you’re getting are personalized for you? Here are seven indicators to look for:

 

1. The financial professional shows curiosity and asks the right questions. To work for and protect your best interests, a financial professional first needs to make an effort to fully understand you and where your interests lie. They accomplish this by asking a series of general and detailed questions designed to help them size up your general financial knowledge and philosophies about money, to understand your goals, near- and long-term, and to fact-find about your current financial situation — information about your assets (in real estate, retirement plans, stock portfolio, etc.), your balance sheet (income, debt, etc.), and any other financial considerations.

 

Generally, the right time to ask these questions is in the early, formative stages of the adviser-client relationship, says Giefer. “This is a purely qualitative exercise that focuses on the individual's goals, values and objectives. We do several exercises and brainstorming activities with the client(s) to help them articulate their priorities, fears and opportunities. This is by far the most important aspect of our financial planning process…In order to give good financial advice in the areas of cash flow, taxes, saving/investing, insurance, etc., it is vital to have this full qualitative perspective of where each client wants to go.”

 

FPA member Edward R. Jastrem, CFP® says he follows a similar process at his firm, Heritage Financial Services in Westwood, Mass., where “every prospective client is walked through an in-depth process before even actually becoming a client. That process includes traditional data-gathering as well as extensive conversations to bring color to how someone got to where they are today with their family and finances. That opportunity (for the client to share, then for the team to respond with initial planning observations) helps setup client-specific action items both in the near-term and longer term.”

 

2. They take a collaborative approach with their clients. The most productive adviser-client relationships tend to be those in which the financial professional engages the client in the planning process, soliciting ideas from the client, and asking for and welcoming their feedback. “We as advisers must honor and respect the client’s preferences to ensure they live their life on their own terms,” says McIntyre.

 

Situations in which a financial professional consistently makes recommendations to a person without seeking their input, or with little or no Q&A or fact-finding, or without pausing to explain issues the client is struggling to understand, could raise a red flag about that financial professional’s approach.

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3. They give clients options and explain the rationale behind those options. As part of the collaborative approach to financial planning, clients should expect their financial planner to provide a client with options for achieving a certain goal or addressing a specific issue. “It’s about giving people options and helping them to understand the trade-offs they involve,” Giefer explains.

 

It’s also vital for a financial professional to make the effort to ensure a client understands any complexities in the recommendations and services they’re providing. “To ensure success, the focus must be on helping a client understand the various options available and quantifying the implications thereof,” echoes McIntyre.

 

4. They’re team players, showing a willingness to work with other professionals who may be part of a person’s advisory team, such as attorneys, accountants and insurance agents. They’re also willing to tap expertise within and outside their own practice on a client’s behalf when the situation calls for it.

 

5. They integrate their recommendations into a formal, comprehensive plan that’s personalized to the person or couple. A person stands to get the most out of a relationship with a financial professional when they have an actual personalized financial plan to guide them, asserts FPA member Karen B. McIntyre, CFP® of Wescott Financial Advisory Group in Philadelphia, Pa. “If the plan doesn’t take into account their unique preferences, then they are less likely to stick with it.”

 

A comprehensive financial plan is one that covers every aspect of a person’s financial life, including:

 

• Cash flow analysis/planning and budgeting
• Insurance planning and risk management

• Employee benefits planning
• Investment planning
• Tax planning
• Retirement planning
• Estate planning/wealth transfer

Any product recommendation a financial professional makes to a client in these areas should fit in the overall context of the broader financial plan.

 

6. Regularly revisiting your overall plan, and adjusting it as necessary, is part of their process. Markets, personal circumstances and risk factors change, sometimes quickly and unexpectedly. It’s therefore critical that a financial professional revisit the financial plan with the client as needed, and at least annually, in case it requires updating or fine-tuning. “We revisit this on an annual basis to be sure that our recommendations and strategy are specifically tailored to meet the needs and best interests of our clients,” Giefer says.

 

7. They always put their client’s interests above their own interests and those of their firm or the company (or companies) whose products and services they represent. In fact, a financial professional who has earned the CERTIFIED FINANCIAL PLANNER™ (CFP®) designation has the fiduciary responsibility to do so. For example, when evaluating products that are identical except for their fees, a fiduciary is obligated to recommend the lowest-cost product to the client, even if it means a lower sales commission for financial professional.