Q. What is comprehensive financial planning?
A comprehensive financial planning approach considers all areas of your financial situation in the formation of your personal strategy. If you do not consider all aspects of the plan, one area may be adversely affected by isolated decisions, leaving you with an undesired result.
For example, when reviewing your asset allocation strategy you must consider the income tax consequences of changes made in the investment accounts.
Q. What should I expect from a financial planning relationship?
Your advisor should work with you to create a customized financial strategy after identifying your financial goals. The strategy should address all of the unique aspects of your financial situation.
A quality advisor will assist you with the implementation of the strategy. Additionally, your advisor should have a structured on-going client communication protocol to assure that your plan is periodically reviewed, allowing adjustments to be made as changes to your financial situation dictate.
Q. Why is choosing a “fee-only” financial planner important?
Independent and objective advice is essential to the quality of the financial plan. The National Association of Personal Financial Advisors (NAPFA) defines a fee-only planner as one who, in all circumstances, is compensated solely by the client, with neither the advisor nor any related party receiving compensation that is contingent on the purchase or sale of a financial product. Advisors that are dependent upon product sales and commissions for compensation have a greater likelihood of conflicts of interest. Working with a fee-only financial planner gives clients peace of mind as the advisor does not stand to gain financially from their recommendations.
As fee-only planners receive no monetary gain from the implementation of their recommendations, they can independently and objectively advise clients. Independent fee-only advisors are not tied to proprietary financial products and can guide clients to the most appropriate solution.
Q. What questions should I ask when interviewing a financial advisor?
Financial planning certifications and designations?
How long have they been in the business, with what firms?
Will they provide client referrals?
Are they in good standing with regulatory bodies, any disciplinary actions?
Which advisor will provide the actual client consulting?
How is the advisor/firm compensated?
Do they sell financial products or receive "12b-1" fees or "trailers" on investments?
Do they provide a written analysis of the financial situation with recommendations?
Do they assist in the implementation of the plan?
Q. What must a client expect to contribute to the relationship?
We expect clients to contribute and participate significantly to the financial planning process. Clients should be willing to provide all of the background information required for the advisor to prepare thorough recommendations.
Clients should have an open mind with regard to financial concepts, such as savings and debt. Be ready to discuss new financial philosophies.
Clients should be open and honest about their personal values, goals, concerns and preferences. An advisor can only assist a client after understanding the complete picture.
Q. How is the financial strategy implemented if DFM is fee-only and does not sell products?
We provide specific recommendations for the implementation of the financial plan and consider ourselves your personal financial manager. We encourage you to use your current service providers including insurance agents, tax preparers, and accountants to implement the plan as long as they can work as part of the team. Additionally, we can independently direct you to other professional providers who we know and trust such as mortgage professionals, estate planning attorneys, tax professionals, etc. We will coordinate the efforts of your financial team for the successful implementation of the plan.
Q. Do I pay for the first interview?
At DFM we provide a complimentary hour meeting to talk with you about your needs for financial planning services. During this interview, we assess our ability to help you and explain how the process would work for you.
Q. Can I do this on my own?
Do you need professional help in order to design and stick to an effective financial plan? This depends on your unique personal situation and dedication to learning and following key issues. Most find they are better off seeking the information, expertise, experience, and discipline provided by a financial advisor.
Making quality financial decisions requires a high level of commitment to learning and research. Whether you are concerned with an asset allocation strategy, planning for retirement, paying for college expenses or any other financial goal, we believe you are better served by leveraging the experience and expertise of professionals who have dedicated their careers to serving these needs.