TEN QUESTIONS ABOUT FINANCIAL PLANNING

WHAT IS PERSONAL FINANCIAL PLANNING?

According to the The Certified Financial Planning Board of Standards, Inc. Financial planning “is the process of meeting your life goals through the proper management of your finances. Life goals can include buying a home, saving for your child’s education or planning for retirement.

The financial planning process consists of six steps that help you take a "big picture" look at where you are financially. Using these six steps, you can work out where you are now, what you may need in the future and what you must do to reach your goals.

The process involves gathering relevant financial information, setting life goals, examining your current financial status and coming up with a strategy or plan for how you can meet your goals given your current situation and future plans.”

Financial planning provides you with expert guidance by professionals for the improved coordination of financial decision making to satisfy your life and estate needs. It provides direction of portfolio (asset/liability) decisions and fulfillment of portfolio needs through specific product and vendor choices.

WHY DO I NEED PERSONAL FINANCIAL PLANNING?

To organize your finances in the most efficient manner to reduce taxes, maximize investment return, provide adequate risk management, save time and attain financial peace of mind.

BUT CAN’T I ACCOMPLISH THAT MYSELF?

Perhaps, but will you? Most business people and professionals are finding it increasingly difficult to plan adequately for their personal financial growth and security. Among the most common reasons for their frustrations are:

· Lack of time

· The wide variety of today’s investment opportunities

· The complexity of ever-changing tax laws

· The entwining of employee compensation and benefits

Some personal finance software packages, magazines or self-help books can help you do your own financial planning. However, you may decide to seek help from a professional financial planner if:

you need expertise you don’t possess in certain areas of your finances. For example, a planner can help you evaluate the level of risk in your investment portfolio or adjust your retirement plan due to changing family circumstances.

· you want to get a professional opinion about the financial plan you developed for yourself.

you don’t feel you have the time to spare to do your own financial planning.

you have an immediate need or unexpected life event such as a birth, inheritance or major illness.

you feel that a professional adviser could help you improve on how you are currently managing your finances.

you know that you need to improve your current financial situation but don’t know where to start.

WHAT IS TYPICALLY INCLUDED IN A COMPREHENSIVE PLAN?

A plan may range from 50 to 150 pages, based on the complexity of circumstances and the degree of explanation and detail:

· Cash Flow Budgeting Analysis

· Capital Management (debt and investment portfolios)

· Estate Planning and Liquidity Analysis

· Income Tax Projections and Planning

· Retirement (forecasting benefits, costs and options)

· Insurance Needs (life, property, casualty and disability)

· Educational Funding Requirements

· Employee Benefit Analysis (coordinate personal holdings)

· Closely-held Business Analysis

WHAT IS MY ROLE IN THE PLANNING PROCESS?

You and your spouse provide information about your personal and family goals, attitudes about taxes, indebtedness, investment risk and security. Your financial plan will take this information into consideration. You will also be called upon to update this data at least once each year.

WHAT CREDENTIALS DO I LOOK FOR IN A FINANCIAL PLANNER?

Planners can have experience in many fields, including accounting, law, banking, life and health insurance, casualty insurance, finance, business management, taxes and investments. There are also many people holding themselves out as financial planners but do not actually provide financial plans.

· You should look for a CERTIFIED FINANCIAL PLANNER™ certificant, preferably with an additional advanced degree. CERTIFIED FINANCIAL PLANNER™ certificants are individuals who have met CFP Board’s education, examination and experience requirements, are committed to high standards of ethical conduct and who complete CFP Board’s biennial certification requirements to use the certification marks CFP^®, CERTIFIED FINANCIAL PLANNER™ and . A CFP practitioner is a financial professional authorized to use the CFP certification marks who has identified himself or herself to CFP Board as being actively engaged in providing financial planning services. All CFP certificants have voluntarily submitted to the regulatory authority of CFP Board.

· You may search for a Certified Financial Planner™ certificant by clicking the link at the bottom of this page.

ARE FEES FOR FINANCIAL PLANS TAX DEDUCTIBLE?

Yes. Expenses for investment and tax planning are deductible as itemized expenses, subject to limitations - IRS Section 212.

HOW CAN I MEASURE THE WORTH OF FINANCIAL PLANNING?

After your situation has been analyzed and recommendations made, you will be able to compare clearly your present financial condition with what is projected for the future. The long-range benefits should far outweigh the costs.

WHAT DO PERSONAL FINANCIAL PLANS COST?

Planners usually charge between $500 to $5,000 for their advice, but fees can be as high as $10,000 depending on the complexity of the plan. Planners generally charge a fee in order to provide an objective analysis. Yet, clients will still pay commissions when they buy stocks, bonds, insurance policies and annuities.

Since there are commissions associated with the sale of nearly all financial or insurance products, the financial planner may also receive additional compensation in the form of commission on the sale of these specific products.

Some planners still rely solely on income generated from the commissions when clients buy stocks and bonds, and use the plans as a way of generating sales. A small group of planners charge fees only and handle no products at all.

WILL PERSONAL FINANCIAL PLANNING MAKE ME RICH?

Unfortunately, there are no get-rich-quick schemes that really work. All the more reason for personal financial planning; it can help you keep more of what you earn and keep your savings working harder. It does this by:

· Increasing the productivity of assets

· Providing capital growth and security for your family

· Broadening asset structure to reduce risks

· Providing participation in new investment opportunities

· Increasing disposable income through tax savings

· Selecting investment alternatives more carefully

· Minimizing shrinkage of accumulated assets at time of:

- Disability

- Forced Retirement

- Death