A Financial Plan - One and Done? Nope. Not. Even. Close.
So you want to get your financial house in order and get started on a financial or retirement plan. Yay you! You’ve decided that you don’t want an ongoing relationship with anyone, you simply want a plan to show you where you are now, where you want to be, and then to address any gaps in your current situation that will prevent you from getting there. You make an appointment with a fee-only financial planner (hopefully, you’ve done your research and found a CFP® Professional) and are ready to go. After a few meetings and a bill for 8 or 10 hours of the planner’s time, you leave the financial advisor’s office with a beautiful, shiny binder with your very own financial plan – and lots of motivation to do what it says to do… on you own, investing through the mail with your favorite no-load mutual fund company.
That’s all well and good, but what happens not if but WHEN something changes? What if you don’t save what you’d planned because of some unexpected expenses? What if you lose your job? What if the laws, or the stock market outlook, or interest rates change and all the assumptions in your plan go right out the window? What then? Do you go back to your financial planner and start all over again? Or what if your beautifully bound plan becomes a bookend on the shelf and you never open it again? A plan doesn’t do any good if it’s not implemented.
These are just a couple of the problems with approaching retirement planning with the idea that you can go pay for a financial plan and you’re good to go.
You could take your financial plan back to your financial planner, explain the changes that have occurred in your life and pay him an hourly rate to bring the plan back in line. While you will probably walk out of the planner’s office with new financial plan (and a new bill), isn’t this all going to happen again? We can’t predict the future and stuff happens! Not only that, but what is the incentive for the financial planner to provide you with excellent service? To follow up and monitor his recommendations, and make new ones when legal or economic circumstances change? Since he may never see you again, I can’t help but think that he’d be tempted to maximize his billable hours for your project, and then move on to the next customer. Likely, under the “hourly fee” model, you end up with an inferior plan that you paid too much for.
What’s the answer? The answer is comprehensive wealth management relationship with a team of financial professionals. A financial planning firm that provides ongoing, comprehensive wealth management will provide you with a team that is consistently monitoring your situation and modifying your financial plan as needed. Your financial plan should be a living, breathing document that changes with you, not a dusty old binder that sits on a shelf. Say you suddenly inherit $500,000 from a distant uncle. How will that impact your timeline to retirement? If it were me, I’d want to know. Or say your daughter decides she wants a destination wedding in Fiji. Can you afford it? If so, where should you pull the money from? I could go on with all kinds of things we can’t plan for – these are the kinds of situations that a fee-only, comprehensive wealth management firm made up of Certified Financial Planner® professionals can assist you with. By building a relationship with them, by them knowing who you are and what you need, when the questions arise, they will be there to provide answers to the stuff that comes up in your life. Yes, it’s a commitment. Yes, it requires that you do some research to find a firm that fits your personality and is in line with your investment philosophy but this is your financial future we’re talking about. It’s the difference between KNOWING that you can retire and thinking that maybe you’ll be okay if you retire. Just like other professional relationship you have in your life, you want to have a financial planning firm who you trust to have your best interests at heart, who you’re comfortable sharing the nitty gritty details of your life with and who will get the job done well.
So, when the day comes that you decide to get YOUR financial house in order, you may want to reconsider the "one and done" approach. Having a team of professionals by your side can make all the difference when approaching your retirement planning.
Karen Rasmussen is a Registered Paraplanner with PARAGON Wealth Strategies and serves as our Director of Client Service. For her full bio, click here. See important disclosures on our disclosures page.