You Don’t Need A Financial Plan — You Need Financial Planning
What’sTheDifference?
WhenIfirststarttalkingtoanewclient,Ioftendiscoverthattheyhaveafinancial plan.Atsomepointinthepast,theyworkedwithafinancialplannerwhohelpedthem buildaplanthatwasprobablyagoodonefortheirneedsatthattime.Butthen…The plansatontheshelf.Thedetailsoftheplanwerenotfullyexecuted.Moreimportantly, prioritieschanged.Buttheplandidnotkeepup.
ThisiswhyIsay youdon’tneedafinancialplan,youneedfinancialplanning.Ifyou aretoachieveyourwealthcreationgoalstosupportyourlifestyle,loved-onesand retirement,financialplanningcannotbeaone-timeevent.
Afootballanalogy
Whatwouldyouthinkofafootballteamwhogatheredallofthebestplayers,madea game-planandthenongame-daysaidtotheirquarterback “we’regoingtohaveyou sitthisoneouttoday?”Whatdoyouthinkthechancesarethatsuchateamwouldwin?
Thisisexactlylikeafinancialplanversusfinancialplanning.Forfamiliestoachieve theirwealthgoals,aplanistherightstartingpoint.Buttheproblemisthatmostplans
don’tgetfullyexecutedbecausethereisnoquarterbackactuallymanagingthegame towardasuccessfuloutcome.
Soundfamiliar?
Doesthissoundlikeyourfamily?Doyouhaveafinancialplanthathasnotbeen updatedinseveralyears?Doyouknowwhereyouareintheplanversusyourgoals?Do youhavesomeonereviewingtheprogressyou’vemadeagainstyourplan?
Keydifferences
Afinancialplanistheblueprintorthefoundationofthefinancialplanningprocess. Thinkaboutthelast24monthsofyourlife.Howmanythingshavechangedinthose24 months?
Whathashappenedtoyourinvestments?Havetheygrown?Havetheydiminished? Usuallythisiswhatpeoplethinkaboutwhentheyconsidertheirfinancialplan.Ifyou workwithmultipleinvestmentmanagers,whoiscoordinatingtheoverallasset allocationstrategy?Isthecombinedassetallocationalignedtoachieveyourfinancial goals?
Peopleoftenthinkoftheperformanceoftheirinvestmentsasthecriticalindicatorof theirwealth.Butthisisawoefullyinadequatepictureoffinancialplanning.
Thinkaboutyourlovedones.Howhastheirsituationchangedinthelast24months? Whathashappenedwithchildrenandgrand-children?Havetherebeenbirths,deaths, divorces,marriages,adoptions,graduations?Haveyourestatedocumentsbeen updatedtoreflectthesechanges?
Thinkaboutyourtaxburden.Hasitchangedeitherbecauseofneworupdatedtaxlaws orbecauseofchangesinyourfinancialsituation?Haveyoutakenadvantageofallof theopportunitiesavailabletoyoutomitigatetaxes?
Thinkaboutyourassetssuchasreal-estate,automobiles,collectiblesorothervaluable items.Whendidyoulastreviewinsurancepoliciestoensuretheseareallfully protected?Areyoupayingtoomuchforinsuranceorareyourassetsunder-insured?
Thinkaboutretirement.Howconfidentareyouthattheplanyouhaveinplacetoday theplanyouareactuallylivingeveryday,nottheonesittingontheshelf—willactually helpyouachieveyourgoals?
WhydoIask?
ThereasonIaskisbecauseIworkwithaselectgroupofclientseverydaywho definitelyknowtheanswerstothesequestions.Butoftentimes,theirfriendsorother loved-onesdonotknowtheanswers.Yetthesesamepeopleareconfidentthatthey’ll reachtheirgoals.Theyhappilypointtothefinancialplantheybuiltafewyearsback.
Idonotsharetheirconfidence.Ibelievetheyarelikethefootballfranchisethatbuilta game-planbutthentookoutthequarterbackongameday.
Sohereisthebigquestion.Whoisactuallymanagingyourfinancialplanforyou?
I’venoticedatrendamongaffluentfamilieswhodonothaveafinancialquarterbackin thegameforthem.Thesepeopleoftenearnahighincome.Sometimestheyare businessownersorexecutives.Theyownlovelyhomesanddrivenicecars.Theyhave largeinvestmentportfolios.Theycarrylifeandpropertyandcasualtyinsurance.They haveretirementandcollegeplans.Theymighthaveabasicwill.Theyfeellikeallis good…UntilIstartaskingthemquestions.
Assoonaswestartdiggingintothefinerpoints,Iusuallydiscovernumerouscritical detailsthataremissingfromtheirplan.Usuallythishappensbecausethereisnota financialquarterbackwhoiscoordinatingtheoverarchingplan.
Investmentmanagementversusfinancialplanning
Acommonmisconceptionforthosewithoutafinancialquarterbackisthattheir portfolioperformanceisthekeytotheirfinancialfuture.Ihaveheardmanypeoplesay overtheyears “heywe’redoingfinebecauseourportfolioiswayup.”
Investmentmanagementisacriticalcomponentofwealthbuilding.Butifyouareonly workingwithafinancialadvisor,notafinancialquarterback,youaremissingakey pieceofthepuzzle.Mostinvestmentmanagersbuildanassetallocationstrategybased onyourstatedgoals.Thatisimportantandit’sagoodstartingpoint.
Butwhatismoreimportantisthatyourinvestmentplanisdesignedbasedonyour timehorizon,risk-tolerance,cash-flowneeds,desiredlife-style,calculatedbusiness risks,familysituationandamyriadofotherconcerns.Tobuildaplanthattakesallof thesefactorsintoaccount,youneedfarmorethananinvestmentmanager.Youneeda wealthmanager.
Nextsteps
IrecognizethatwhatIamsuggestingisnotaneasythingtodo.Keepingeverythingup todateandmonitoringprogressagainstgoals,wellthattakesalotofexpertiseand timeandacoordinatedteam.Butit’sworthit.
Thosewhohaveafinancialquarterbackplayingthegamewiththemeverydayare muchmorelikelytowinthanthosewhoasktheirfinancialquarterbacktoshowup everyfewyears.Ifyouorsomeoneyoucareaboutcouldbenefitfromathorough analysisoftheirfinancialsituation,I’dappreciatetheopportunitytohavea conversationwiththem.
Written by Timothy Lofton64 Followers
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Timothy Lofton is a Senior Executive and Dynamic Leader with a proven track record of driving business growth. Check out TimothyPLofton.net for even more!
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