Financial Planning FAQ

Financial Planning Frequently Asked Questions

12 frequently asked questions about our financial planning philosophy, process, and expertise

 

1. Philosophically, how do you operate -- what is the overall nature of your business and the way in which you function?

Our wealth management philosophy is based on the idea of designing and building a house. The initial planning stage is the most important. All of the decisions that happen before ground is broken, or before any financial transactions, will determine how satisfied you are with the result. If the house has been carefully and patiently designed the actual construction and subsequent result should deliver few surprises and should wholly contribute to the achievement of your objectives.

2. What is the process that you use in developing a financial plan?

All financial plans follow the financial planning process outlined below:

a. Preliminary meeting to establish general goals, objectives, investment knowledge & experience and to discuss data gathering process.

b. Once all required information has been received we perform an analysis of your total financial situation, noting areas of weakness and ways to work toward your stated goals.

c. Meeting to review and confirm information and preliminary findings.

d. Development of Efficient Frontier. This begins the portfolio review and design segment. An asset allocation will be derived with particular consideration given to your risk tolerance, time horizon, and required return. This allocation will produce the highest rate of return with the least risk. Retirement assets are included with regular taxable assets when developing your asset allocation.

e. Meeting on Asset Allocation to review alternatives and come to agreement on asset allocation strategy. Discuss other issues and revise information if needed.

f. Development of Proposed Portfolio with specific investment recommendations corresponding to the asset allocation agreed upon. Proposed portfolio includes Morningstar Risk and Return Ratings if available, dividend yield, dividend frequency, long-term historical performance, projected five-year value assuming reinvestment of capital gains and dividends. Comparison with current portfolio to highlight improved performance; display change in yield, income received, growth as a percent and in dollars, and total return expressed as a percent and in dollars.

g. Meeting to review and discuss Proposed Portfolio.

h. Preparation of final plan for delivery. May include: current and projected income/expenditures, Statement of Net Worth, Life Insurance Needs Analysis, Retirement Funding Analysis, Retirement Income Analysis, and Estate Planning showing estimated estate tax before and after use of exemption equivalent trusts. The final plan can be as long as 150 pages depending on the level of complexity and detail.

3. How much time will be required?

The amount of time depends on how simple or complex your financial situation is, how long it takes you to deliver the required information accurately and completely to our satisfaction, and the number of changes and/or modifications introduced during the planning. A minimum of three months is required generally.

4. How often should we review the financial plan?

The financial plan should be reviewed annually at a general level. If the overall plan is designed well to begin with, only major changes in lifestyle or unforeseen changes in other areas would cause you to have to alter your plan. This does not apply however to your portfolio. Your portfolio should be monitored quarterly during implementation. This is the only way for to know how you are progressing toward the achievement of the recommended asset allocation. Once the recommended allocation is reached, portfolio performance and asset allocation reviews should be performed at least semi-annually.

5. How and when do you decide to change an investment?

All investments are given a period of 3 years before a change is considered. Investment styles come and go and we do not advocate market timing or jumping in and out of the market. It may take several years for a fund’s investment style to reemerge. If a fund underperforms its peers for a period of 3 years by more than a few percent, it is considered for replacement.

6. How extensive is the plan? What does it include, or specifically exclude?

The plan will include written analyses of all financial planning areas you need assistance with. The plan does not include product sales. Portfolio management is offered as a separate service in conjunction with performance and allocation reviews and includes the buying and selling of securities according to your plan; As fee-only planners we receive no compensation from the securities we would be trading on your behalf.

7. How do you integrate insurance, investments, tax planning, retirement planning, and estate planning into an overall financial planning process?

Each section of a comprehensive plan is looked at separately AND as they affect each other. A decision in the portfolio affects taxes, retirement, and estate. A decision with insurance affects estate and may affect retirement. A decision in tax definitely affects portfolio. Modular plans are very difficult and tend to be short sighted because trying to analyze just one area results in recommendations that disregard their effect on the rest of your financial situation.

8. Do you specialize and, if so, in what areas?

We specialize in securities analysis, portfolio development, and performance monitoring. Georgia Bruggeman has been investing for over 20 years and, in addition to being a CFP, her credentials include an MBA in Finance from Babson College. Georgia has also passed Levels I and II of the Chartered Financial Analyst designation. This is a rigorous 3-level program concentrating on investment analysis and portfolio management. Each exam is given once a year and is 6 hours in length. Areas of study include Ethics, Economics, Quantitative Analysis, Derivatives, Equity Valuation, Fixed Income Analysis, Venture Capital, International Investments, and Real Estate.

9. How is your income derived, and what is your fee structure?

We are fee-only financial planners. We do not earn any compensation from any of our recommendations. Our financial plan creation fees range from $3,000-$4,000 depending on the complexity of your situation. Ongoing planning starts at 1% for up to $1,000,000 in investment assets and declines above that level. This includes ongoing comprehensive financial planning.

10. What is your minimum investment requirement?

In order to provide the best possible service to each of our clients, we require a minimum investment of $500K. If you can’t meet that minimum, please feel free to contact us and we’ll refer you to another reliable advisor who can help.

11. On what do you base your investment recommendations?

Investment recommendations are based on your risk tolerance, time horizon, and goals first and foremost. For mutual funds, we review semi-annual reports showing the schedule of investments and their asset allocation; we also incorporate the Morningstar risk and return rankings. Manager tenure, expense ratios, and turnover are also considered. We generally recommend no-load funds and ETFs.

For individual equities, we use proprietary valuation models. Risk, time horizon, and goals are again considered along with the size of the portfolio when recommending individual stocks. Fundamental and technical research is performed when analyzing stocks.

12. Do you have any financial or other interest in the investment options that you recommend?

We have no financial or other interest in the investment options that we recommend. (See “Why Choose A NAPFA financial advisor“)

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