Who’s that financial plan for anyways?

Many people think that a financial plan is for their benefit.  No doubt, our clients are more organized and have a clearer picture of what the future may hold. However, when we create a financial plan, we’re also creating it for ourselves, as advisors. Without knowing what a client’s plan is, we cannot provide recommendations other than off-the-cuff “rules of thumb.” How certain do the investment returns need to be?  How long do we have until we need those funds?  Are these funds meant for retirement in ten years or a wedding next month?  By strategically establishing and prioritizing our client’s goals, we can begin to establish what monies are dedicated to which goals.  We can then determine the best investment allocation based on risk and reward potential.

This is the purpose of a plan. We offer financial plan driven investment advice. If a goal is 20 years out we can weather volatility, and with systematic rebalancing, potentially even benefit from said volatility.  When it comes to monies we will need next month, volatility is a not worth the risk, and certainty becomes our driving factor. It is impossible to give good investment advice without knowing an investor’s ability to meet emergencies, an investor’s likelihood of withdrawing assets to help a child purchase a house, or even an investor’s likelihood of purchasing a vacation home or RV. By having a financial plan in place, when our clients call us with news of an emergency or special opportunity, we are positioned to offer guidance as to whether we feel that this distribution is in line with their priorities or a new goal which must be evaluated and prioritized. We can advise as to which account a withdrawal should be pulled from: brokerage, IRA, or Roth. These decisions may seem like minutia, yet over the long term, have a dramatic impact on financial success. As advisors, it gives us the ability to offer personalized advice to help our clients make big decisions in real time – when the advice is needed most. With a living plan in place, decision making can be timely, prudent, and efficient. Best practice is to have a plan in place before that next big decision comes up!