THE TEN MOST ASKED QUESTIONS
ABOUT PERSONAL FINANCIAL PLANNING
WHAT IS PERSONAL FINANCIAL PLANNING?
Expert guidance by professionals for the improved
coordination of financial decision making to satisfy life and estate needs.
Direction of portfolio (asset/liability) decisions. 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
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 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'S 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 PLANNER?
Financial planners can have experience in many
fields, including accounting, law, banking, life and health insurance, casualty
insurance, finance, business management, taxes and investments. Professional
designations include:
CFP
Certified Financial Planner
RFC Registered Financial Consultant
ChFC Chartered Financial Consultant
CPA Certified Public Accountant
CLU Chartered Life Underwriter
CPCU Chartered Property and Casualty Underwriter
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 ale 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