TROY M. SMITH
CERTIFIED FINANCIAL PLANNERTM
Independent Financial Planning Advice Since 1989
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FINANCIAL PLANNING

The Financial Planning Profession

Financial Planning is the successful transition from Asset Accumulation to Income Generation to Wealth Transfer. Because the Financial Planning profession is still developing, there are huge differences in the services of those holding themselves out to be "Financial Planners".

One of the main differences among those who call themselves "Financial Planners" is how they are regulated. While planners that are registered as advisers are regulated as fiduciaries, the vast majority are not. A fiduciary is someone who is required by law (see: http://sec.gov/divisions/investment/advoverview.htm) to act in your best interest, to disclose conflicts of interest. Look for professionals who have demonstrated competence as evidenced by the education, experience, and credentials.

Scope of Wealth Management Industry Professionals:

  Stock Broker Insurance Agent Money Manager CPA Attorney CFP® Professional
Can Legally Charge Fees for Service and Advice
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Can Produce Financial Statements for Clients
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Cash Flow Advice
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Tax Planning Advice
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Insurance Needs Advice
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Investment Advice
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Retirement Advice
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Estate Planning Advice
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Charitable Planning Advice
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Integrated Financial Planning Advice
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Even though stockbrokers and investment consultants may be duly licensed and credentialed, they are not required by statute to be held to a fiduciary standard to act in the best interest of the client and provide full disclosure unless they are also registered as advisers.

Money Management Is Not the Same as Financial Planning

Money management, whether for a fee or simply stock brokerage, is not the same as financial planning. The Securities and Exchange Commission ruled in 2007 that stock brokers may not charge fees for either money management or financial planning unless they are also registered as advisers.

Stock brokers do have a duty to provide investment recommendations that are suitable, but they cannot give financial planning advice and charge a fee.

To see what the SEC has told financial advisers, including those giving financial planning advice, about their roles as fiduciaries, please see the following link found on the Securities and Exchange Commission website: http://www.sec.gov/divisions/investment/advoverview.htm

Selecting a Financial Planner

Credentials
Credentials are also important in selecting a financial planner. Many financial planners attract clients because of their ability to analyze a client's issues and produce an initial financial plan. The quality of the plans varies widely. Some are boiler plate plans giving the same general recommendations to different clients with similar assets, and some are very well researched and presented.

Long Term Commitment
Financial planning is a process, not an event. Since the initial written financial plan is a static document, it quickly becomes interesting only from a historical perspective. It has been our experience that most planners who produce financial plans send only investment reports thereafter. What the clients can end up with is fee-based money management that is expensive with no ongoing financial planning or advice.

This sets clients up for another solicitation from another planner willing to use the creation of a new financial plan as a loss leader and solicitation for yet another money manager. Many clients want ongoing advice, not just quarterly investment reports.

Your goals and circumstances change over time. Your assets are adjusted, hard assets are depreciated, and your income tax and estate situation is always dynamic. Financial planning is more than a few pages of recommendations that ends with the implementation of products and services.

Legally Capable of Handling Your Complete Financial World
Every financial transaction has an effect and must be recorded and analyzed so the planner can advise clients as their world changes. For example, having all the tools to quickly analyze the effects of selling real estate on a client's cash flow, income taxes, financial statement and estate plan is critical, and is the service most often missing in a "Financial Planning" engagement.

Planners must have all of the systems in place to allow them to answer your questions "on-the-fly" aided by financial planning reports produced in real time, where they are able to make immediate recommendations.

Being able to make recommendations backed up with real-time analysis in the areas of Retirement, Cash Flow, Income Tax, Investment and Estate allows a planner to:

  • Create a formal Financial Plan
  • Proactively contact clients when tax laws and other changes occur affecting their taxes or their investment portfolio
  • Clearly show clients the overall results and expenses of their investment portfolio
  • More fully incorporate a client's goals and objectives into their financial plan
  • Identify when to bring in appropriate experts to help with important financial decisions
  • Provide a coordinated and integrated process for investment decision making
  • Coordinate and organize all financial documents
When looking for advice, look for a financial planner who is registered and regulated to act as a fiduciary (in your best interest) and required by law to disclose their conflicts of interest and has demonstrated competence as evidenced by education, experience, and credentials.

View the Financial Planning Process

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     Securities and Advisory Services, including Financial Planning, offered through H. Beck, Inc., Member FINRA and SIPC.
Copyright © 2009 Troy M. Smith, Certified Financial PlannerTM
Serving clients in Raleigh, Cary, Durham, Chapel Hill and other Triangle area cities.