Do You Need a Financial Plan?

We have an unwavering passion for preserving investments during volatile markets and providing our clients with capital preservation, inflation protection, and steady ongoing income. With all that said, we cannot build family legacies without a tailored, comprehensive financial plan and solutions to go along with the plan.

We often say, “Without a plan, how do we even know how to manage your money? How much risk do we need to take?” Without a plan, you’re just investing and hoping you have enough; hoping you won’t run out of money someday. “Hope” is not a strategy.

Let me quickly explain what a financial plan is and then I’ll tell you who needs one and who doesn’t. A financial plan takes into account all aspects of your life:

  • Income today
  • Earned income after retirement
  • Today’s expenses
  • Post-retirement expenses (inflation adjusted)
  • Big, one-time expenses
  • Pensions
  • STRS, PERS, SERS
  • 401(k)s, 403(b)s, 401(a)s, 457 Deferred Compensation plans
  • IRAs, Roth IRAs, Individual/Joint Investment accounts, and Trust accounts
  • Social Security income and any needed or applicable SSI optimization
  • Taxes owed over time

Then, the next step is to make assumptions on how much your income and expenses will increase over time (inflation) as well as assumed rates of return on investments. Once we have this information, we’ll tell you on what date you can retire, if you so choose, and we’ll know the required minimum rate of return to ensure you never run out of money, post-retirement.

MGP-Screen-Shot Do You Need a Financial Plan?

Naturally, we’d always take into account your risk tolerance using one of those quizzes you’ve surely taken in the past. However, they’re kind of silly when you consider the fact that the financial plan overshadows risk tolerance. Why?

Well, let’s say you hate the U.S. stock market, don’t want anything to do with international stocks, and want to generally avoid anything with “stock market risk.” But when we do your financial plan, we find you need to earn a rate of return north of 6%/year… How can we attain a 6% average annual return without the use of the stock market? We can’t. In a situation such as this, if you don’t invest in the stock market in some capacity, we call it “going broke, safely!”

Most extremely conservative investors don’t realize there is risk everywhere. For instance, while bonds might seem “safe,” interest rates have fallen for more than 30 years, pushing bond values up. Where do you think interest rates are going to go from here? Up, right? And what happens when interest rates go up? …bond values decrease. So even a seemingly “safe” investment in bonds might turn out to be one of your riskier pieces of the pie over the coming decade or more. You have to adapt to the changing investment landscape – but that’s for another discussion.

Are there people who don’t need a financial plan? Definitely. On one end of the spectrum, there are individuals and couples who have very little retirement (or any) savings to speak of, a lot of revolving debt (credit cards), and a spending problem. For these people, a budget is probably all they need… and then the discipline to stick to the budget, of course!

Then, on the other end of the spectrum, there are the high net worth individuals, couples, and business owners. These are people who have amassed enough savings (retirement and otherwise) to where they have more than enough money to worry about much of anything. For these folks, we typically still complete a comprehensive plan – if they’ll allow us to! However, the biggest goal for these folks is to ensure they don’t “mess it up.” Said another way, they just have to make sure they continue growing their money, while at the same time avoiding a big chunk of another 2000-02 or 2007-09 market crash. Remember, it’s not a matter of if – it’s when it’ll happen again.

For all these reasons, we do not charge our clients a dime for their financial plans, nor do we charge any fees for periodic updates of their plans. We continue to build our firm with a culture of integrity and trust, because doing what is right for our client is always better for our business in the long run.  This is likely one of the reasons why the Better Business Bureau honored us with the Torch Award for Ethical Enterprising (which can only be earned once) four years ago.

It’s imperative that you understand when new clients come on board, the last thing we will discuss is transferring their money to us. In fact, unless there are extenuating circumstances present that warrant an expedited process – such as legal issues with your past advisor or an imminent market crash – we meet with every client at least three times, prior to signing any paperwork. After 14 years in business, we’ve learned we only want to help those who will allow us to help them. You never have to worry about the uncomfortable feeling of being “sold” something.

With that, it’s also important you understand that we are not an insurance company, we do not sell products, and as a fee-only firm, we legally cannot accept commissions.

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You are the owner of your financial team and we’re the coach. While we do not sell insurance, we do offer advice on life insurance, long-term care insurance, estate planning, retirement planning, tax planning, and college savings advice. If we determine together that there is a need for additional insurance, we’ll work with your agent – or refer you to one of our trusted professionals – who will help you buy the right amount for the lowest cost. You also have 24/7 access to your accounts online and via our mobile app.

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As your life progresses, your financial plan matures along with you, which is why you will not be handed a 100-page, 10-pound, leather bound binder to take home! The financial world is complicated, but one of our mantras is, “Less is more.” While anything can be printed if you want a copy you can hold, touch, and feel, your financial plan is available, online in real-time, 24 hours a day, seven days a week.

We run our company similar to that of an all-inclusive resort. As I mentioned above, our financial plans are created at no additional cost, they’re updated each time you come into our office so that we can be accountable, keeping a constant finger to the pulse of your financial heartbeat. We also have numerous educational opportunities and other events throughout the year – all of which are free.

We started from scratch (zero… no clients whatsoever) back in 2001, but hard work, authenticity, and transparency has rewarded us with immense growth over the years. It is a statistical fact that communication is the #1 reason individuals and businesses fire their financial professional. Not portfolio management. Not fees. People fire their financial firms because they don’t communicate frequently or effectively enough.

This is why, in every weekly meeting, we remind ourselves of this simple, constant truth: Without our clients, we would not exist. We pride ourselves on being proactive rather than reactive. So regardless of how big we get, we will always strive to be “Big enough to matter, but small enough to care.”

If you know someone who would like to be added to our mailing lists for market commentary, educational articles, and invitations to our events (both social and educational workshops), please forward this email to them, or reply with their name and email address so that they don’t miss out on any future events and/or educational opportunities!

If you have any questions regarding portfolio management, estate planning, or financial planning, please contact us so we can confidentially discuss you or your company’s situation further.

Categories: Adam Koos, CFP®, CMT®, Educational Articles, Market Commentary

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