Financial Planning Myths - Michael D Puckett, CFP

FINANCIAL PLANNING FINANCIAL PLANNING MYTHSMYTHS

Myths Commonly Associated with Financial Planning, the Profession & Its

Practitioners

Presented By

Michael D Puckett, CFP

CFG Wealth Management Services, Inc.

TODAY’S AGENDATODAY’S AGENDA

Define Financial Planning, The Financial Planning Process

Myths Associated With Financial Planning, The Profession & Its Practitioners

What Financial Planning Can Do For You

FINANCIAL PLANNING FINANCIAL PLANNING DEFINEDDEFINED

“Financial Planning is the process of examining a client's personal situation, financial resources, financial objectives and financial problems in a comprehensive manner, developing an impartial, integrated plan to utilize the resources to meet objectives and solve problems, taking the steps to implement that plan once approved by the client, and monitoring the plan performance to take corrective action as necessary to assure that results match the

plan projections." - College of Financial Planning


“Financial Planning is planning for and managing life’s financial outcomes”


Retirement – “Lifestyles”Family Related Expenses

– Housing, College, WeddingsAsset Protection

– Personal Liability, Heath CareElder Care

– Family– Personal


How Do You Define Financial Planning?


Financial Planning is planning for, “executing” and managing life’s financial

outcomes!

THE FINANCIAL PLANNING THE FINANCIAL PLANNING PROCESSPROCESS

A formal, six-step process, formulated by the College of

Financial in 1972, designed to address, in whole or in part, life’s financial issues and opportunities.


Step One: Establish the Client/Planner Engagement; You and Your Planner Should

– Discuss your objectives & expectations– Discuss the services available– Clarify responsibilities and time frame– Finalize the scope of the engagement– Determine the fee/compensation arrangement


Step Two: Gather Data & Determine Goals; Your Planner Should– Obtain information & documents– Help you “refine” or crystallize goals– Develop an understanding of your values

& attitudes

FINANCIAL PLANNING FINANCIAL PLANNING PROCESSPROCESS

Step Three: Examine Current Financial Condition, Problems & Opportunities;

Your Planner Should– Analyze information– Identify problems & opportunities across each major

financial planning discipline Finance – Asset & Liability Structure, Cash Flows Investment Taxation – Ordinary and Income Risk Management – Insurances & Asset Protection Law – Estate, Charitable & Legacy Planning


Step Four: Develop & Present Financial Plan; Your Planner Should– Prepare & present a personalized financial

plan– Establish a review cycle


Step Five: Implement Your Plan; Your Planner Should– Assist the Client or manage the process as

defined in the Engagement Agreement


Step Six: Monitor the Financial Plan; You and your Planner Should– Review changes in personal circumstances– Review and evaluate impact of changing

tax laws– Review and Discuss changing life

circumstances– Make periodic adjustments or

recommendations as necessary


Hire Planner and set expectations

Gather Data and establish personal goals

Determine and discuss problems and opportunities

Final document, set policy and action plan

Implement as required

Monitor and manage the outcome


Myths Commonly Associated with Financial Planning Issues, the Profession & Its Practitioners

FINANCIAL PLANNER FINANCIAL PLANNER DEFINEDDEFINED

“Someone who uses the financial planning process to help you reach

your life plan or

lifestyle goals.”

How Do You Define Financial Planner?


Myth #1 – “All Financial Planners are Certified Financial Planners.”


Registered Financial Advisor Registered Financial Planner Registered Financial Consultant Registered Investment Advisor Chartered Financial Consultant, Charter Life

Underwriter Personal Financial Specialist

FINANCIAL PLANNING ASSOCATIONS & FINANCIAL PLANNING ASSOCATIONS & SELF REGULATING ORGANIZATIONS*SELF REGULATING ORGANIZATIONS*

Certified Financial Planner Board of Standards, Inc.* CFP

Financial Planning Association Society of Financial Services Professionals* ChFC National Association of Personal Financial Advisors American Institute of Certified Public Accountants* PFS International Association of Registered Financial

Consultants Registered Financial Planner Institute

CERTIFIED FINANCIAL PLANNER CERTIFIED FINANCIAL PLANNER BOARD OF STANDARDS, INC.BOARD OF STANDARDS, INC.

Established in July of 1985 by the College of Financial Planning

Took Ownership of CFP marks in 1986 and established Disciplinary Rules & Procedures

CFP Board established a single comprehensive examination in 1991

Financial Planning MythsFinancial Planning Myths

Myth #2 – “Financial Planners are primarily investment advisors.”

FINANCIAL PLANNING FINANCIAL PLANNING DISCIPLINESDISCIPLINES

FINANCE – Asset & liability analysis, cash flow analysis and budgeting

TAXATION – Ordinary and investment income tax planning

SECURITIES – Investment analysis and portfolio construction

RISK MANAGEMENT – Insurance & asset protection analysis and planning

LAW – Estate, charitable & legacy planning

Financial Planners Should Be Competent Generalists


An Investment Advisor“Any person who, for compensation, engages in the

business of advising others, either directly or through publications or writings, as to the value of securities or

as to the advisability of investing in, purchasing, or selling securities, or who, for compensation and as part of a regular business, issues or promulgates analyses

or reports concerning securities.” – Registered Investment Advisor Act, Section 202 - Definitions

REGISTERED INVESTMENT REGISTERED INVESTMENT ADVISORADVISOR

Federal or state registration required Activities are supervised by the Securities

and Exchange Commission per the 1940 RIA Act

Form ADV, Part 1 & 2 updated annually Periodic Audits Full disclosure required

– Part 2, Form ADV and / or– Provide firm brochure disclosing Form ADV, Part 2

information


Myth #3 – “Financial Planners are the same as stockbrokers or other

financial salespeople.”


FINANCIAL SERVICE COMPANIES – Manufacture & Distribute Financial

Products– Business Purpose Almost Always Evolves

Around a Financial Transaction Occurring– Planners Who Are Affiliated With A

Financial Services Company May Be Compelled To Focus On A Transaction Solution vs. A Procedural Solution


Myth #4 – “Financial Planners only serve the affluent.”

FINANCIAL PLANNERSFINANCIAL PLANNERS

Financial Services Company Affiliation– Banks, Broker/Dealers, Insurance,

Investment CompaniesIndependent – Industry Definition

– Broker/Dealer or Insurance Co. LinkTotally Independent Firm

– General or Specialized Orientation


Myth #5 – “Financial Planners only do big plans.”

Financial Planning ProcessFinancial Planning Process

Focused or “Segmented” Planning– Finance oriented (Put financial house in order,

develop an operating budget)– Planned expense (College, wedding, etc.)– Portfolio Construction, Inv. Policy Statement– Risk Management & Asset Protection– Retirement Income Planning– Estate or Legacy Planning


Myth #6 – “Legitimate Financial Planners only charge fees.”

FINANCIAL PLANNING FINANCIAL PLANNING ASSOCIATIONSASSOCIATIONS

Professional Fee Only – 22%*Professional Fee-Based CompensationProfessional Fee & Commission – 61%Commission Only

*College of Financial Planning – 2003 Survey of Trends in The Financial Planning Industry

FINANCIAL PLANNING ISFINANCIAL PLANNING IS

ADVICE CENTERED

PROCEDURIALLY ORIENTED

A CONTINUOUS PROCESS


Myth #7 – “Financial Planners aren’t worth the expense.”

Financial PlannersFinancial Planners

“You should have an expectation of getting what you are willing to

pay for.”

“Define the expectations and parameters at the onset of the

engagement.”


Myth #8 – “Most people don’t need a Financial Planner.”

U.S. Savings Rate Remains LowU.S. Savings Rate Remains Low

U.S. Consumer DebtU.S. Consumer Debt

Personal Net WorthPersonal Net Worth

Median net worth through October 2002 was only$80,700

Median net worth for 55-64 age group is only $181,500

RETIREMENT CONFIDENCE RETIREMENT CONFIDENCE “ A Nation of Optimists” “ A Nation of Optimists”

Only 24% of Americans fear outliving their savings*

Forty-seven percent of workers NOT saving for retirement are somewhat confident of having enough money at retirement*

32% of baby boomers don’t spend any time on retirement planning**

Source: 14th Annual Retirement Confidence Survey, Employee Benefit Research Institute, American Savings Education Council, Mathew Greenwald & Associates ** ING U.S. Financial Services

Longevity IncreasingLongevity Increasing

Someone age 65 today had a life expectancy of age 64 at birth

Someone age 65 today has a life expectancy of age 83

Life expectancy increased 30 years between 1900 and 2000

WHAT FINANCIAL PLANNING WHAT FINANCIAL PLANNING CAN DO FOR YOUCAN DO FOR YOU

Organize your finances

Improve cash flow Lower personal

income taxes Plan for retirement Plan for college

expenses

Improve investment performance

Lower investment risk

Reduce insurance costs

Minimize estate settlement costs

WHAT FINANCIAL PLANNING WHAT FINANCIAL PLANNING CAN DO FOR YOU?CAN DO FOR YOU?

Put You In Control of Your Financial Situation

Provide Clarity and Purpose Toward Fulfilling Lifestyle Goals

Provide Financial Peace of Mind

BEGIN WITH THE END IN MINDBEGIN WITH THE END IN MIND

THANK YOU FOR YOUR THANK YOU FOR YOUR ATTENTION!ATTENTION!

CFG Wealth Management Services, Inc.888-234-9674 / [email protected]

Financial Planning Myths - Michael D Puckett, CFP

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