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TROY M. SMITH
CERTIFIED FINANCIAL PLANNERTM |
Independent Financial Planning Advice Since 1989 |
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FINANCIAL PLANNING |
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The Financial Planning Profession
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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.
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Scope of Wealth Management Industry Professionals: |
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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.
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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
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Selecting a Financial Planner |
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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.
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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.
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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
Go to New Client Area
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| "You can't control the wind, but you can adjust your sails to get to your destination." |
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| Securities and Advisory Services, including Financial Planning, offered through H. Beck, Inc., Member FINRA and SIPC. |
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Copyright © 2009 Troy M. Smith, Certified Financial Planner TM
Serving clients in Raleigh, Cary, Durham, Chapel Hill and other Triangle area cities.
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