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RESOURCES


  1. What is a Financial Plan?
  2. Who or what is a Financial Planner?
  3. Who would benefit most from your services?
  4. What is “Fee-Only” financial planning and why should that be important to me?
  5. I understand the benefits of working with a Fee-Only financial planner, but I might need to obtain financial products. How will I be able to do that?
  6. I already have substantial assets and (I think) am doing quite well financially. Can you help me?
  7. What types of investments does your advice cover?
  8. If you develop a financial plan for me, am I obligated to comply with the recommendations?
  9. What is your investment philosophy?
  10. How do you price your financial planning services?
  11. How much will my financial plan cost?
  12. Are the fees your charge me tax deductible?
  13. Once my financial plan is completed, will our relationship end?

 

1. What is a Financial Plan?

A financial plan is a set of answers to the important questions on issues that impact you and your future. Written out, a financial plan makes it easier to communicate your intentions to other advisers (e.g. your CPA, attorney, etc.) or your family members. It also serves as a reminder of where you are now, where you want to go and how you intend to get there.

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2. Who or what is a Financial Planner?

The fact is anyone can say that they are a financial planner. Some mortgage brokers, insurance salesman, stockbrokers, Registered Investment Advisors, money managers, CPAs and even some attorneys use the term. However, in terms of financial planning, their education level and capabilities can and do vary broadly. The field of financial planning is comprised of several focuses which include estate planning (legal), taxes and general finance (CPA/accounting), risk management (insurance) and investment (securities/real estate/banking). Historically, most financial planners have evolved out of one of these four areas. However, in recent years, a number of colleges and universities, including UC Santa Cruz, locally, have developed programs in financial planning. A graduate from such a program will have a good understanding of all the areas of financial planning. Much more, say, than the somewhat narrow view of a person with experience in just one field.

While it is important to ask a planner about their education and experience perhaps the more important concern is their objectivity. Very often, someone will purport themselves to be a “financial planner.” The reality, though, is that they are trying to sell you something. The concern is that even if he doesn’t have the best solution for your situation, the salesman cum financial planner might sell you a product anyway. The other problem in a commission situation is the lack of transparency. You do not know what you are paying your financial planner because the commission is a hidden fee.

The alternative to a “salesman” approach is the “fee for service” concept. Pay the planner by the hour or for a specific project or service. Some planners work on a retainer basis, i.e. they charge a set fee for the year. Some, mostly money managers, are paid on a percentage of the assets that they manage for the client. Any planner should be comfortable and willing to discuss the cost of his or her services.

When dealing with an advisor who is a fiduciary, you can be confident that your interests will always come first. Registered Investment Advisors or RIAs are required by the state and/or federal law to act in your best interests at all times and to fully disclose compensation arrangements prior to service. This is not the case with a sales-oriented advisor.

When you seek out a planner, look for one who has formal education in the various disciplines of a financial planner. Also, ensure that he or she is unbiased in his or her recommendations (i.e. is not attempting to sell you a product) and has had a good amount of experience.

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3. Who would benefit most from your services?

Any individual who is seeking financial peace of mind can benefit from our services. We have found that clients generally fall into one of four life stages. Those just getting started tend to be between the ages of 18 and 29. Those who are building for their future are aged 30 to 49. Those who are nearing retirement age are from 50 to 64 years old. Then there are the retirees who are typically aged 65 and older.

The majority of our clients tend to fall into the last two categories. For those in the first two, we recommend that they first read our e-book for young professionals and consult with us after they have implemented the recommendations from those sources.

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4. What is “Fee-Only” financial planning and why should that be important to me?

Fee-Only means that we are not paid from any source other than our client. We do not accept sales commissions; we work solely for our clients. Because we do not sell financial products such as investments and insurance, there are no third-party relationships or outside influences to taint our thinking and financial recommendations. In addition, our firm is a Registered Investment Advisor (RIA); as such, we must comply with a host of regulations designed to protect the consumer.

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5. I understand the benefits of working with a Fee-Only financial planner, but I might need to obtain financial products. How will I be able to do that?

While we do not sell financial products, we will offer specific recommendations and opinions regarding the various products that may be appropriate for you. If, for example, you need to obtain an insurance policy or a new mortgage, invest in a portfolio of mutual funds, find an estate-planning attorney or a tax professional, we can direct you to the resources you need to obtain these products and services.

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6. I already have substantial assets and (I think) am doing quite well financially. Can you help me?

Yes. In general, people who need more sophisticated financial planning or advice will find our services beneficial. If someone has a myriad of accounts in many different places we can help you simplify your portfolio and still meet your goals. Or if you are looking for a professional review or for a second opinion to ensure that you are on track we can provide that, as well. We can also help you define an appropriate asset allocation so that you can meet your goals.

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7. What types of investments does your advice cover?

We provide advice for all types of securities, including mutual funds, stocks (as they relate to your portfolio holdings), bonds, bank deposits and annuities. We also provide guidance on mortgages, budgeting and cash flow issues, 401(k), 403(b) and other retirement programs, life and disability insurance, etc. If it has to do with money and finances, we can provide counseling, guidance and/or resources for you.

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8. If you develop a financial plan for me, am I obligated to comply with the recommendations?

Absolutely not. Our recommendations are exactly that. They are offered to meet your needs and objectives, but you are under no obligation to act on them. In today’s competitive market, it makes sense to shop around for the best available product or service. For instance, if we believe you have a need for life insurance, we will suggest the type of policy, which riders and what amounts may be best for you. It is totally your decision to acquire more coverage or not. At your request, we can direct you to several companies that can provide a quality product at competitive prices. The same applies to estate lawyers, accountants, money managers and mortgage brokers. We will recommend a name or two, but it’s entirely up to you to decide whether or not to pursue our recommendation.

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9. What is your investment philosophy?

As financial planners and investment consultants, we believe in the following fundamental principals with regard to designing an investment portfolio and making specific recommendations. We believe the purpose of a client’s investment portfolio is to fund current and/or future financial objectives. That the design of the portfolio must take into account the client’s financial objectives, tolerance for risk, needs for current income or liquidity, and special considerations such as income tax and estate taxes. The important thing that we want to stress is that no one can predict the future. It is difference of opinion that makes a market. Investment and economic “experts” provided with the same information often come to different conclusions. We do not suggest that we can, or that any of the money managers that we recommend, will make the correct decision every time. We do believe that studying the historic trends and relationships of investment classes can provide valuable insight. We also believe the appropriate allocation of investment assets for your goals and risk tolerance is the most important component in developing an investment portfolio. We believe that having a diversified, well-balanced portfolio, following long-term buy-and-hold strategies, with low costs and having patience will increase the likelihood that you will achieve your long-term financial objectives. See our Investment Philosophy.

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10. How do you price your financial planning services?

The fees are based on the project that we are asked to complete or on the actual time involved in meeting with you (in person or over the phone), researching and analyzing your current situation, and providing specific recommendations. At the end of our “Get Acquainted” meeting we will provide you with a fee quote.

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11. How much will my financial plan cost?

Financial planning fees are determined on a project basis; the total fee for a financial plan will vary from client to client and is based on the specific needs and complexity of your situation. An estimate is provided at the conclusion of our “Get Acquainted Meeting,” but only after your personal needs have been fully identified.

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12. Are the fees you charge tax deductible?

Yes. Section 212 of the Internal Revenue Code permits an itemized deduction for tax and/or investment advice in the miscellaneous section of Schedule A. It is subject to a 2% floor of the adjusted gross income on a personal tax return.

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13. Once my financial plan is completed, will our relationship end?

The actual “engagement of specific services” may end but many of our clients choose to meet with us periodically. Because financial planning is a process, not an event, we offer periodic reviews as requested and/or as are needed.

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