A good financial plan is an important tool for a happy retirement.

As you (now) know, a comprehensive financial plan is an important tool for a happy retirement and the ability to achieve your financial goals. It’s your road map to financial success.

Most firms have flexible software packages that allow them to stress-test the plan under different financial scenarios. Any financial advisor now has the ability to develop a financial plan for you that includes an analysis such as a Monte Carlo simulation.

No, that doesn’t mean the advisor runs off to Monte Carlo and gambles with your money! This is a tool that generates random portfolio returns for the lifetime of the portfolio. The returns utilize the expected return of the portfolio, given its composition, and the standard deviation. Most Monte Carlo simulations include the “Great Recession” returns that the portfolio would have experienced at the time.

This analysis provides the probability that the portfolio will “survive” the random returns generated over its lifetime, given the portfolio’s composition, the investor’s financial goals and expected income and expenses over time. It’s a good indicator of the viability of the plan.

With today’s modern financial planning software, pretty much anyone can input the numbers and get a reasonable result out of the other end.

Should you let the software do all the work and not worry too much about who’s doing the plan?

No, because the software is just a tool.

You want the right person wielding that tool.

A financial plan from a credentialed financial advisor. 

It’s important that your financial planner hold a financial planning designation. The most well-known and accepted standard is from the CFP Board.

A CFP® professional has been through a learning course that typically takes 18-24 months to complete. Passed an exam, which may have taken one or two days, depending on when they obtained the certification. Plus, developed financial plans for clients for two or three years before being awarded the designation. Read how we exceed CFP® professional standards.

Thereafter, they are required to earn continuing education credits (including ethics) in order to maintain the designation. As you can see, it’s a pretty rigorous process, and the learning doesn’t stop after the designation is earned.

By contrast, a financial advisor without the designation may not have any continuing education requirements. They may have some licenses issued by FINRA, the Financial Industry Regulatory Authority. Depending on what they sell and how they sell it.

Security licenses may take a month of study (or less) to obtain. An advisor with no financial experience at all is able to hang out their shingle once they’ve passed the exam. There’s no requirement for the advisor to have any length of practice in the field.

The CFP® professional will work with you on a continuous six-step financial plan process.

1. Define the relationship between client and planner
2. Collect the data, set expectations and develop financial goals
3. Analyze and evaluate
4. Create recommendations
5. Implement the plan
6. Monitor progress

A good financial planner won’t hand you the book of paper that the financial software generates and allow you to let it sit on your bookshelf.

It’s also helpful to work with a fee-only financial planner. They don’t charge commissions, so they normally don’t work with products such as life insurance and annuities. All CFP® professionals learn about insurance and annuities as part of the course work. They can identify when and where these needs arise.

Not everyone needs them, even though many salespeople like to sell them. These types of products pay out hefty commissions. There might be a conflict of interest for a planner who also sells these products.

Most fee-only planners have a trusted professional they will send their clients to if such a need is discovered during the six-step financial planning process. By working fee-only, there is no incentive to find an insurance or annuity need.

Your fee-only planner is also likely a fiduciary. Put simply, this means that they put the clients first, ahead of their own interests. The standard for financial advisors is lower, where their recommendations only need to be suitable for the client.

A financial plan from an experienced financial planner.

If your planner is a CFP® professional, they have experience in the field of financial planning. Having years of experience means that they know what the common mistakes are, and they can give their clients a head’s-up if they seem to be entering this territory.

It’s also important to hire a planner that has worked with clients like you before. They know the common mistakes, but they’re also empathetic to the concerns you have.

In addition to a comfortable retirement, legacy or passing wealth down to the next generation might be a concern. Selling your business and managing the effects of that sale are big questions for clients who own their own firms.

Many women at this stage in their lives find themselves sandwiched. Caring for children, who may be at or near college-age, and all the associated financial and emotional baggage. Trying to fund their own retirement and protect themselves in old age. And simultaneously dealing with aging parents.

It’s a lot to take on! Having a financial planner who has worked with sandwiched women knows exactly what a huge issue this is.

Your financial plan, customized to your needs.

When you go to a financial planner who has the software but not the experience, you’re more likely to end up with a generic plan. Inputs go in the software, and outputs come out. Some of these software packages can generate hundreds of pages!

Some of the software packages have a blunt-force instrument that adjusts all the goals to bring the plan to survival. Your inexperienced planner can use this solve button.

But sometimes the results are ridiculous. Your budget might be cut in half to make everything work, which is usually not realistic at all. There may be some goals you need to give up on, or you may need to work longer than you originally desired. But both of these may be more palatable than halving your budget!

Experienced financial planners know that some issues and goals weigh more than others. If the plan doesn’t quite work, or the expected probability is too low, a CFP® professional who’s been in the trenches for a while has a good idea about what tweaks need to be made.

They can work with you to prioritize goals, so that you may give up on one or meaningfully reduce it in order to make the plan survive for your entire life.

A financial plan is a tool you can use.

A pretty document with charts and graphs that look very nice and is provided to you in a lovely binder is utterly worthless if it sits on your shelf. Remember, the plan is a road map! It’s a document that changes as your life changes. It requires updating and monitoring as time goes on.

Consider a road atlas (if you’re old enough to have used maps!) There were maps in it with lots of detail, down to the street name.

However, it probably didn’t have a lot of detail on how the street was named, who named it, who used to live on it. Or the history of the county in which the street was developed, with lovely color pictures of what the place used to look like. Or pictures of when the road was built, or the homes and business that line it now.

Similarly, you don’t need a lot of extraneous detail in your road map. You don’t need pages and pages of colorful charts and graphs in order to understand and implement the plan. Most financial software systems come loaded with all kinds of charts and graphs. You just want the ones that are relevant to you, with the detail that you need to carry it out.

Most of the systems also come with the statistics behind the charts and graphs. Some people need to see the statistics so they can understand where the numbers came from, and satisfy themselves that the plan results didn’t just come out of thin air.

Others just want the top level summaries and prefer to leave the details to their planners. Either way is fine, and an experienced planner will provide the customized detail that’s right for you.

A financial plan from Platt Wealth Management

We are a fee-only firm that is a member of NAPFA (National Association of Personal Financial Advisors). We act as fiduciaries, putting your needs first. Both of our financial advisors are CFP® professionals, with years of experience in the field of personal finance.

We tailor our comprehensive plans to each client, ensuring that the plan is clear, well-organized and easy to follow. We continue to monitor the plans after they’re set up.

Email us to get started on your financial plan today!

Platt Wealth Management offers financial plans to answer your important financial questions. Where are you? Where do you want to be? How can you get there? Our four-step financial planning process is designed to be a road map to get you where you want to go while providing flexibility to adapt to changes along the route. We offer stand alone plans or full wealth management plans that include our investment management services. Give us a call today to set up a complimentary review. 619-255-9554.