"If you fail to plan, you're planning to fail!"
- Benjamin Franklin
Over the years, I have talked to hundreds of investors. Far too often I find that investors start with the investments; specifically the greed of investment returns or the fear of investment loss, as opposed to a Financial Plan. Greedy investors frequently take more risk than their financial plan requires; many times that risk is not rewarded when viewed through a Monte Carlo simulation – the probability of not outliving your retirement savings. Fearful investors can be found to not take enough risk to give them a statistically significant probability to meet their long-term cash flows. Both are examples of failing to plan.
Before investors even consider putting their hard earn savings into tit-for-tat investments, they should start with the question of “Why do I need to invest in the first place?”. Well, as the quote above states, “if you fail to plan, you are planning to fail!”. I’m certain you have heard that quote, probably a hundred times. Of course you believe it and live it every day… right? I am sure you have a budget, savings and tax strategy, financial plan, debt strategy, will and estate plan, and have insured properly for life insurance and long-term care. I am also sure your investments are tuned tightly to all these topics… right?! If you are like most investors, you are nearing retirement and are scratching your head as to how you got to today… some money and uncertainty about your financial future.
Today, let’s talk about the financial plan, a comprehensive financial plan; primarily because almost everything else listed above is solved for or evaluated using this tool. Let’s not get this confused with a complimentary plan which is really nothing more than a sales tool. On the surface, it is fine because most clients do need to know if they will outlive their investments. Unfortunately, when clients receive a complimentary plan, often times advisors do not continue to plan for their clients to make sure their financial path is clear or look deeper than the investments and cash-flow projections.
At Kabarec Financial Advisors, Ltd. (KFA), we believe clients should receive a comprehensive financial plan. Below is what we recommend looking for in a comprehensive financial plan:
- Certifications and Fiduciary Standard –You should look for a fee-only, fiduciary with a CFP®, who must put your interests before their own interests.
- Cash-flow analysis with ongoing monitoring – As markets shift, expenses go up for an unforeseen reason or inflation unexpectedly rises. The financial plan is the tool that helps clients understand what Minimum Acceptable Return (MAR) they need and are comfortable to earn in order to meet their long-term financial cash-flows (i.e. retirement, education planning, legacy planning, etc.) while considering variables like budget, savings, investment risk profile, etc. and solving for a range of statistical success through a Monte Carlo simulation. That said, the financial plan should be routinely monitored, including the Monte Carlo simulation, to ensure the client will successfully reach their goals as life happens.
- Financial Manager –Financial planning should also include a financial manager (see below)– the process of routinely evaluating all areas of your financial life with you and your other key advisors (i.e. CPAs, attorneys, insurance agents). This tool helps to ensure that you and your loved ones not only have enough money in retirement, but also have planned appropriately for such things as disposition and taxation of your estate, financial protection in case of an unexpected loss or tax planning so that the IRS doesn’t erode your hard earned nest egg. In addition, the financial manager should include organizing your financial life in one place so that you have the comfort of knowing that your family will be able to find all your important financial documents and have a team of advisors ready to help them when that time arrives.
Many people remember the Full-Service Gas Station experience. As you pull on to the gas station lot and drive over the rope, the bell rings prompting a smiling attendant to serve you. The attendant would wash the windows, check the oil level and tire pressure, and pump gas into your car. Many of the old commercials on television from companies like Texaco or Sinclair used language like “keeping your trust” and “trust is everything”. Even the uniforms of a grey button up shirt, tie and hat showed pride in the service provided. Now fast forward to today’s gas station experience… it is anything BUT full-service.
Would you use the words “Full-Service” to describe your current Financial Advisor?
If you have ever contemplated working with a financial advisor, we would like to restore your trust and faith that there are still companies that show pride in the service they provide by the manner in which they work. You may even be happy to hear that a financial advisor SHOULD be described as Full-Service. There is a common misunderstanding that a Financial Advisor can only help you with your investments just like today’s gas station mainly provides fuel for your car. On the contrary, a Financial Advisor can provide many services that you may not be aware of.
Below is a short list of services a Full-Service Financial Advisory Firm like KFA offers:
- The ability to develop a financial plan, put the plan into motion, and monitor the plan so you can enjoy living life without worrying about tomorrow
- A network of professionals who can assist with very complex situations such as income tax, estate planning, property, life, health insurance, and banking
- Provide investment management based on your goals and objectives and tolerance for risk
- Show a willingness to answer any question that impacts your financial goals
- Share an excitement about reaching your goals and seeing you become successful
- Share a genuine concern about your situation without passing any judgment
- Have a desire to assist you in leaving a legacy to your next generation of heirs
- Look at your overall picture to make sure you have the right type and amount of insurance, beneficiaries, and informed individuals in place should a life changing event take place
- The willingness to help complete paperwork and make necessary phone calls due to an unexpected loss or change in circumstances
- Organize your financial life for you
- Extended family; You truly become part of our family
Maybe the most important quality is that you feel comfortable working with your advisor and will not hesitate to call or become anxious when it is time to schedule your checkup.
Come visit our Full-Service firm to see how our services can help you. If you or someone you know needs guidance from our professional team, please contact us at 847-934-7777 to schedule a free consultation today.
Has anyone ever said to you, “I wish I would have started when I was your age”? Whether they’ve said this regarding a parenting topic, exercising or beginning their financial plan, it’s not until we are in that same situation years down the road that we realize we should have heeded their regret and started.
We are all aware of the popular, for some dreaded, individual tax deadline of April 15th. Unfortunately there are no deadlines for starting your financial plan or saving for the future. Until something happens where we realize we are in over our head and need to reach out for professional help, do we make it a priority.
Your finances each day help you either move closer to achieving your goals or further from completing them. A plan is a plan, and normally we have to adjust here or there to refine it. Each day you earn income or pay an expense, your plan can change; your financial plan is not a one-time event.
Perhaps other reasons have stopped you from reaching out to a financial advisor. You may think you don’t have enough money or it’s too expensive.
We encourage you to call us today! Let’s get started moving closer toward achieving your financial goals. Even billionaires started somewhere. Contact us at 847-934-7777 to schedule your free consultation.