“Financial planning” means much more than just investing. Everyone has different goals, so it’s important to have a unique plan that works for you and your financial situation, both now and in the future. Bringing all the pieces of your financial life together is a challenging task.

One of the major challenges is finding the right person to put your plan together. Many professionals may call themselves “financial planners,” but they are not all qualified Certified Financial Planners, CFP® professionals with extensive training and experience; certified and held to incredibly rigorous ethical standards. CFP’s understand all the complexities of the changing financial climate and will make recommendations in your best interest.

How your investment advisor is paid should be of significant concern to you. Advisors are fee based, commission based or a hybrid of fees and commissions. Fee based advisors charge either a flat fee or an annual asset management fee that is directly tied to positive or negative results of your investments. When the market drops so does your advisor’s income. Commissioned based advisors receive commissions or bonuses that are tied to the products they sell, such as annuities, whole life insurance, and loaded mutual funds. Commissions are paid up front so there is no consequence to your advisor if your account value goes up or down. A representative of large broker dealers continued employment depends on their ability to sell investments that their employer requires them to promote. These investments may not be the best suited for the client’s personal objectives.

When it comes down to how your advisor is paid, ask yourself which arrangement is in your best interest.

Who needs a financial Plan?

People who fall into one or more of these categories will benefit. Someone who:

  • Wants to better manage your finances, but aren’t sure where to start
  • Doesn’t have time to do your own financial planning
  • Wants a professional opinion about the plan you’ve developed
  • Doesn’t have sufficient expertise in certain areas such as investments, insurance, taxes or retirement planning
  • Has an immediate need or unexpected life event

How do you get started?

Step 1 …Agree on how to work together

In our practice, we meet for a complimentary consultation to listen to the prospective clients describe what they want to get out of a relationship with a CFP®. We explain the services we provide and define each other’s responsibilities. If there is a connection, the next steps are identified. If not, that’s alright too. If you are meeting with a CFP® and they are doing all the talking, it’s advisable to keep interviewing individuals until you find a professional interested in hearing about you, your money, your goals and your success.

Step 2 …Gather information about your finances and set goals

You and your CFP® professional will talk about your current financial situation and gather any necessary documents. Together, you’ll define your personal and financial goals, including timeframes. There will be a list of items to collect, like previous year’s income tax returns, account numbers and bank information. It is very important discuss your comfort level when it comes to taking financial risks.

Step 3 … Analyze and strategize

Your information will be entered into very sophisticated software and analyzed extensively. The data entry and analysis varies but usually takes our practice 30-50 hours depending on the complexity of your financial situation. The analysis covers your assets, liabilities and cash flow, current insurance coverage, investments or tax strategies. It also includes planning for replacing automobiles on a regular basis, weddings, vacations and large ticket items that pertain to your situation.

Step 4 … Develop recommendations

Next step is to discuss the baseline plan that shows you exactly where you stand financially today. It will project your future including the impact of inflation. Once you understand the baseline, the CFP® will make some financial recommendations, explaining the rationale so you can make informed decisions.

Step 5 …Develop “What if” Scenarios

With a baseline plan, you can model situations from a financial standpoint to see how they impact your future. Many clients want to know if they “right sized” their family home would make a big difference in the long term. Others want to know “the best time” to retire to maximize their benefits. Once you have decided on the right plan for you, it’s time to make it work. It is so much easier to project these scenarios as opposed to putting your house up for sale and crossing your fingers, hoping it makes a difference.

Step 6 … Put plan into motion

We communicate with you as a financial partner serving as your mentor, coach, coordinating the process with you and other professionals, like attorneys. Need to make a big purchase or large financial decision? Our clients call us to review their options so they can understand make an educated decision. For example, paying for a large purchase by cashing out a 401K with huge penalties and taxes, rarely makes sense. There are many other alternatives that can make much more sense

Step 7… Monitor progress and stay on track

As you work towards your goals, we monitor your progress to make sure you’re staying on track, reviewing your situation and making any necessary adjustments to our recommendations.

Step 8 … Buy your Retirement

What’s the most expensive thing you’ll ever buy in your lifetime? When you put money into a retirement nest egg, you’re “buying” your retirement. Selecting the most beneficial options for your Social Security, planning for longer life expectancies and assuring you have sufficient assets to last a lifetime is more complicated than it was a generation ago.

Regardless of your income, a CFP® professional can help you:

  • Calculate your net worth
  • Avoid financial setbacks
  • Deal with major life changes
  • Avoid debt and credit problems
  • Decide where to put your money

Today, there are an overwhelming number of choices for saving and investing your money, and a CFP® professional can help you navigate those options. Creating a robust, realistic plan will help you stay on track to have the retirement you want.


Written By Susan Brown, Brown and Freeman LLC with contributions from Letsmakeaplan.org


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