Many people overlook the power of financial planning and confuse it with investment advice. So, what is Financial Planning? In the simplest form, it is the coordination and implementation of strategies for several financial disciplines that includes investments, retirement, insurance, estate and tax planning.
According to the CFP Board , The Standards of Professional Conduct (Standards) define financial planning as “the process of determining whether and how an individual can meet life goals through the proper management of financial resources. Financial planning integrates the financial planning process with the financial planning subject areas.”
Some of the important value lies in the coordination and implementation of strategies. Implementation has often been the Achilles heel of financial planning. It is one thing to make a recommendation, it is another to implement the recommendation. We have seen prospects who have a well-designed estate plan, but the beneficiaries were not named correctly, or the Revocable Trust was not funded. Without implementation, all the planning in the world doesn’t work.
Consumers often think one of their professionals, whether it be their CPA, attorney, insurance or investment adviser, is looking at the big picture, when in many cases they are not. One of the reasons your professional team may not be looking at these things is that they are not getting compensated to see the big picture. In most cases the big picture and the implementation are up to you.
How Financial Planners Add Value
Financial planners, especially those who have earned the CFP® designation, are trained to look at the big picture. It is important that somebody is in the driver’s seat and doing this job. If not, you could miss many valuable opportunities.
Certified Financial Planner® Professionals who work as Registered Investment Advisors (RIA) are governed by the Investment Adviser’s Act of 1940. That requires them to be fiduciaries. This fiduciary standard is a higher bar than the suitability requirements of investment brokers. Compensation from fees can eliminate many conflicts of interest that are inherit with selling products. The combination of being paid by a fee, unrelated to product sales, and the Fiduciary standard pave the way for a CFP® to look at your big picture to truly add value to your financial life.
Don’t get fooled into thinking all financial advice is the same. Do your research to enable you to understand the differences. If you have any questions, call us at 717-560-3800. We will be happy to provide additional information and answers.